Barbados Audit ffice · 1.5 The Audit Office is therefore involved in three types of audits. One type (Compliance Audit) involves verifying whether the financial rules and other laws

Barbados Audit Office

Report

of the

Auditor General

for the year

2019

Strengthening public accountability by providing fair and independent reports

Barbados Audit Office

Report

of the

Auditor General

for the year

2019

MISSION STATEMENT

The Mission of the Audit Office is to strengthen public accountability by providing fair and

independent reports after careful examination of accounting records and use of

resources.

THE GOAL

The goal of the Audit Office is to promote staff development, achieve a high standard of

auditing and contribute to the general efficiency and effectiveness of the Public Service.

Report of the Auditor General 2019

i Auditor General’s Report 2019

Table of Contents

INTRODUCTORY COMMENTS ........................................................................................... 3

CHAPTER 1……………………………………………………………………………………………..5

GENERAL ISSUES .............................................................................................................. 5

CHAPTER 2……………………………………………………………………………………………..9

COLLECTION OF REVENUE .............................................................................................. 9

AUDIT MANDATE................................................................................................................ 9

STATEMENT OF REVENUE COLLECTED…………………………………………………..10

STATEMENT OF FINANCIAL POSITION…………………………………………………….11

LEDGER ACCOUNTS…………………………………………………………………………..11

FINANCIAL REPORTING……………………………………………………………………....13

OTHER MATTERS……………………………………………………………………………....14

CHAPTER 3…………………………………………………………………………………………....15

PROCUREMENT OF LEGAL FEES BY STATE-OWNED ENTERPRISES………………...15

INTRODUCTION………………………………………………………………………………………15

SUMMARY OF FINDINGS……………………………………………………………………...17

DETAILED FINDINGS…………………………………………………………………………..18

CHAPTER 4……………………………………………………………………………………………31

PROCUREMENT PRATICES OF THE . …………………………………………………………31

BARBADOS WATER AUTHORITY ................................................................................... 31

EXECUTIVE SUMMARY .................................................................................................... 31

INTRODUCTION…………………………………………………………………………………39

AUDIT OBJECTIVES……………………………………………………………………………40

AUDIT MANDATE……………………………………………………………………………….41

SMART METERS PROJECT…………………………………………………………………..42

BACKGROUND INFORMATION………………………………………………………………42

TENDER FOR THE SUPPLY OF 98,800 SMART WATER METERS ................................ 44

ENCRYPTION CODES FOR WATER METERS ................................................................ 47

PAYMENT OF US$2.75 MILLION FOR CONSULTANCY SERVICES…………………...50

PROTECTIVE METER BOXES………………………………………………………………...51

GOVERNANCE . ……………………………………………………………………………………53

CONCLUSION ……………………………………………………………………………………..54


ii Auditor General’s Report 2019

RECONSTRUCTION OF RESERVOIR AT GRAND VIEW .............................................. 57

ESTABLISHMENT OF DESALINATION PLANTS .......................................................... 62

& WATER WELLS ........................................................................................................... 62

DESALINATION PLANT MULLINS/BATTALEY’S & TRENTS ....................................... 62

DRILLING OF WELLS AT TRENTS, ST JAMES ............................................................ 63

DESALINATION PLANT AT HOPE, ST. LUCY............................................................... 64

DESALINATION PLANT AT HARRISON’S POINT, ST. LUCY ....................................... 64

WATER WELLS AT GROVES, ST. PHILIP ..................................................................... 65

DESALINATION PLANT AT GIBBONS/EALING GROVE, CHRIST CHURCH ............... 67

SERVICE CONTRACTS…………………………………………………………………………….68

MAINTENANCE CONTRACTS ....................................................................................... 68

CONTRACT FOR PLUMBING SUPPLIES ...................................................................... 69

SUPPLY OF COMMUNITY TANKS ................................................................................. 70

CHAPTER 5…………………………………………………………………………………………......75

AUDIT OF STATUTORY BOARDS, GOVERNMENT COMPANIES AND CONTROLLED

ENTITIES………………………………………………………………………………………..........75

AUDITS OF STATUTORY BOARDS AND OTHER AGENCIES CONDUCTED BY THE

AUDIT OFFICE ................................................................................................................ 75

AUDITS OF STATE AGENCIES CONDUCTED BY ........................................................ 85

PRIVATE SECTOR AUDITORS ...................................................................................... 85

STATUTORY BOARDS AND GOVERNMENT COMPANIES ......................................... 85

AUDITS OF SECONDARY SCHOOLS ......................................................................... 100


3 Auditor General’s Report 2019

Introductory Comments

In 2019, a considerable amount of the Office’s resources were used in the

clearing of a backlog of outstanding audits of a number of statutory boards whose

accounts were not submitted for review for a number of years. Steady progress was

made with a number of agencies. The main driver for the submission of these accounts

was the Ministry of Finance, which had indicated to these agencies the importance of

having their accounts audited as part of the Country’s arrangements with the International

Monetary Fund. It is unfortunate that these agencies have not been able to present their

accounts annually for audit in a timely manner. It is hoped that in the future, there will be

greater adherence to the deadlines for the audit of the accounts of all state agencies as

required by the law. This would ensure that the accounts are audited annually thus

ensuring accountability for funds allocated. The Boards of Management should be the

driving force in ensuring that Management of their agencies prepare the accounts on a

timely basis.

2. There are still a number of state agencies that are several years in arrears

and this include the National Insurance Fund which has seven years’ accounts to be

audited. My Office will do all in its power to assist in getting rid of this backlog. This is a

most challenging exercise as the longer the accounts remain unaudited, the more difficult

it becomes to resolve issues that arise during the audit, such as the provision of

appropriate schedules and the answering of any queries that develop.

3. It is of particular concern that the financial statements of the Government of

Barbados, prepared by the Treasury Department, for the financial year ending 31st March

2019 have not been presented at the time of writing. The lateness in the presentation of

these accounts for audit is a relatively new occurrence and should be of serious concern

to the Government. Action needs to be taken to resolve this issue as a matter of urgency.



4. One of the main challenges faced by the Auditors during 2019 was obtaining

information from certain state agencies. In some cases, the information requested was

not supplied and this resulted in the Auditors not being able to carry out assessments on

the efficiency and effectiveness of the use of resources and the verification of figures in

the financial statements. These agencies need to understand that they are utilizing public

resources, and are accountable for all matters pertaining to it use. The Auditor provides

a critical step in ensuring that there is transparency in the decision making process and

that funds were used as intended, all relevant laws are observed, and that value for

money was achieved.

5. In spite of the challenges outlined, I thank the members of my staff for their

support, as well as the relevant officers from the audited bodies who assisted. I look

forward to a more productive 2020.

Leigh E. Trotman, CPA

Auditor General

May 29th, 2020

CHAPTER 1


CHAPTER 1

GENERAL ISSUES

____________________________________________________

Introduction

his Annual Report of the Auditor General to Parliament is presented

in accordance with Section 38 (1) of the Financial Management and

Audit Act, 2007-11 (FMAA or the Act). This Act stipulates that “the

Auditor General shall report annually, as soon as possible and not

later than the last day of December following the close of each

financial year, the results of his examination of the accounts and any

failure to observe the enactment or other laws of Barbados”.

1.2 The Auditor General is also required to prepare and deliver an audit on the

Financial Statements of the Government, which are prepared by the

Accountant General in accordance with Section 36 (1) C of the Act. The

statement produced by the Accountant General represents the activities of

Ministries and Departments. The financial activities of other State Agencies

such as Statutory Boards and Companies are reported on separately.

1.3 The Audit Office has a broad mandate for conducting audits on any

Government agency. This mandate is derived from the Constitution of

Barbados, and the Financial Management and Audit Act. Section 113 (2)

of the Constitution requires the Audit Office to audit the accounts of the

Supreme Court, the Senate, the House of Assembly and all Departments

and offices of the Government annually.

T

CHAPTER 1


1.4 In accordance with Section 113 (2A) the Auditor General can also, on his

own initiative, carry out examinations into the financial management of any

State Agency, including the efficiency and effectiveness of the use of their

resources in discharging their functions.

1.5 The Audit Office is therefore involved in three types of audits. One type

(Compliance Audit) involves verifying whether the financial rules and other

laws and procedures are adhered to, in respect of financial transactions.

Another type (Financial Audit) involves the verification and accuracy of the

figures reported in the Financial Statements. The third type (Performance

or Value-for-Money Audit) focuses on whether there was efficiency and

effectiveness in the use of resources. This latter type of audit assesses the

management and operational issues facing an organization or any of its

programmes.

Structure of Report

1.6 This report is divided into four chapters. The first chapter reports on various

activities carried out by the Office and the various changes impacting on its

operations. The second chapter highlights matters pertaining to the

operations of Central Government in relation to the collection of revenue.

The third and fourth chapters consist of two special audits - the first audit

pertains to the payment of legal fees by state enterprises and the second

on the procurement activities of the Barbados Water Authority. Chapter five

consists of a report on the financial audits of the state enterprises.

CHAPTER 1


Autonomy & Staffing

1.7 During the course of the year I submitted a proposal to the Ministry of Public

Service for greater autonomy for the Office. This proposal was in keeping

with international best practice which suggests that audit offices performed

better when they are free from the possibility of operational interference.

The Constitution grants the power to recruit and discipline public officers to

the relevant Public Service Commission so either the Commission can

delegate this authority to another body or person, or the Office can operate

as a statutory body. I would recommend that the delegation option be

exercised. There is already precedent for delegation of authority for

recruitment with the Chief Education Officer. The benefit of this delegation

would be faster employment of staff and decision making as it relates to

human resource management.

Office Activities

Training

1.8 Officers from the office were involved in a number of training exercises and

attendance at conferences during the year. The details of these activities

are as follows:

The Office Administrator, Mrs. Maria Odle-Manns, attended a

capacity development programme entitled “Integrity Control in an

Audit Office”. This Workshop was held in Kingstown, Jamaica during

the period February 4 and 5, 2019. The main focus of the workshop

was to demonstrate to participants the use of an assessment tool

CHAPTER 1


which assesses the effectiveness of the integrity control system in

an organization.

A number of officers attended short training courses held by the

Learning and Development Directorate of the Ministry of the Public

Service. These courses were ‘Having Challenging Conversations

with Employees’, ‘Facilitating Online Instruction’, ‘Project

Management’, ‘Safety and Health’, ‘Performance Management’, and

‘Overview of the Legislative Framework of Government.

The Auditor General attended the XI Congress of the Caribbean

Organization of Supreme Audit Institutions (CAROSAI) in

Georgetown, Guyana during the period 23rd to 27th June, 2019. The

Congress comprised of several technical sessions on a number of

auditing and management topics which were delivered by subject

area experts. The Congress also made decisions pertaining to the

training and development of Audit Officers in the region.

CHAPTER 2


CHAPTER 2

COLLECTION OF REVENUE

Introduction

he Barbados Revenue Authority (hereafter referred to as “the

Authority”) was established by the Government of Barbados on 1st

April 2014 as its Central Revenue Collection Agency.

2.2 One of the main functions of the Authority as outlined in the Barbados

Revenue Authority Act, 2014 is to assess, collect and enforce the payment

of taxes, duties, interest, penalities, fees and other sums payable under the

specified enactments. These enactments included the Income Tax Act,

Cap 73; the Value Added Tax Act, Cap 87; Land Tax Act, Cap 78A; and the

Excise Act, Cap 69. Also included is the Road Traffic Act, Cap 295 and the

subsidiary legislation made thereunder in so far as the enactments relate to

the collection of taxes, fees and other sums.

Audit Mandate

2.3 Under the Authority’s Act, the Auditor-General is the Auditor of the

Authority, and is required to:-

(a) Audit annually, the accounts of the Authority and report to the

Authority and the Minister on the financial satements of the Authority.

T

CHAPTER 2


STATEMENT OF REVENUE COLLECTED

2.4 The Barbados Revenue Authority reported revenue collection of $2.04

billion for the financial year ending March 31, 2019. The Auditors were

unable to verify the amounts submitted in the statement as a result of a

number of errors and omissions. The following are the main issues arising

from the audit of revenue collection of this Agency: -

Taxes on Income and Profits

2.5 Corporation Tax revenue was reported as $539.7 million. The amount

recorded included $244 million which related to the previous financial year.

As a result, Corporation Tax revenue for the financial year 2018-2019 was

overstated by $244 million.

2.6 The amount for Taxes on Income and Profits included $190.6 million

recorded in the E-Tax computerized system. However, access to this

system was not granted to the Auditors thus prohibiting the verification of

Taxes on Income and Profits. Similar restrictions also occurred in previous

years and were reported to management, but no action has been taken to

rectify this situation.

Value Added Tax Revenue

2.7 Value Added Tax (VAT) revenue was reported as $644.4 million. This was

inclusive of $31 million which related to amounts were already included as

revenue in previous financial years. Hence, VAT revenue was overstated

by $31 million in this regard.

CHAPTER 2


2.8 In addition, cash payments made in respect of outstanding amounts, dating

back to 1999, were recorded as revenue in the current financial year.

However, cash collections for amounts owing for previous years are not to

be classified as revenue since amounts were included in earnings for

previous years. This resulted in an overstatement of VAT revenue by $27.4

million. The Authority needs to provide the necessary monitoring of

transactions and possible training to staff, so that officers are aware of the

various accounting treatments for transactions. This would ensure taxes are

accurately recorded and classified.

STATEMENT OF FINANCIAL POSITION

Tax Receivables (Net)

2.9 Tax Receivables (Net) was reported as $1.5 billion. However, this amount

did not include amounts owed prior to tax year 2013 for Income Tax and

Corporation Tax. The reported amounts therefore did not represent total

taxes outstanding.

Highway Revenue Receivables

2.10 No schedule/s was provided to support the $300,000 reported as amounts

outstanding for Highway Revenue. The Auditors were therefore unable to

verify this figure.

CHAPTER 2


LEDGER ACCOUNTS

Transactions of $20.8 million was not captured in Ledger

2.11 Payments from taxpayers in respect of VAT and Taxes on Income and

Profits are collected by cashiers and then posted to the ledger account via

a journal voucher. The balances in this ledger are reconciled with totals on

the bank statement at the end of the financial year. The audit revealed that

amounts totaling $20.8 million of these transactions were not posted to this

ledger account. This failure to post these amounts have adversely affected

the reconciliation process and the accuracy of the accounts.

Bank Reconciliations

Deposit Bank Account

2.12 The Bank Reconciliation Statement of the Authority’s deposit bank account

recorded approximately $17 million as “Other Reconciling Differences” at

31st March 2019. This “reconciling difference” has been brought forward

each month from May 2018 to March 2019. Urgent action should be taken

to clear these differences from the reconciliation before more time elapses

which would result in difficulties in having them resolved.

Other Omissions from the Ledger Account

2.13 There were a number of other omissions from the ledger account as follows:

CHAPTER 2


i. For the months of June and December 2018 and March 2019,

payments made directly to the Authority’s bank account totaling

$48.6 million were not posted to the ledger account, resulting in

misrepresented balances in the ledger.

ii. Daily credit card payments received by the Authority’s cashiers are

reflected on the bank statement and should also be recorded in the

ledger account. It was observed that for the month of July 2018

credit card payments totaling $1.7 million were not recorded in the

ledger account, thus resulting in misrepresented balances in the

ledger.

These omissions indicate that not enough attention is being paid to

the recording of bank information in the ledger. This will have

negative implications for accurate record keeping of information and

for the reconciliation of the bank accounts.

FINANCIAL REPORTING

2.14 In the Statement of Financial Position, there is reference to a $26.2 million

General Fund. However, there is uncertainty of what this balance

represents and how it was derived. There is also reference to ‘Other

Receivables’ of $460 million which do not relate to any assets but

purportedly represents refunds payable by the Treasury.

2.15 The submission of financial information for revenue collection was not in

accordance with Section 22 (3) (c) of the Financial Management and Audit

CHAPTER 2


Act, 2007-11 and did not follow generally accepted accounting principles.

Under this Act the Authority is required to provide information on revenue

collected, amounts paid as refunds, receipts, receivables, waivers and

remittances. This information should be transmitted to the Treasury for

incorporation in the Government’s accounts. The Authority however sought

to portray its revenue collection activity as though it was for a separate fund

and this created some confusion. The Authority should take the requisite

action to ensure that the information produced in the financial statements is

accurate, properly classified, follow generally accepted accounting

principles and is useful to the stakeholders.

OTHER MATTERS

Transfer of Taxpayers’ Information from E-TAX and VETAS to TAMIS

2.16 Taxpayers’ balances from the previous tax systems have not been

integrated into the new TAMIS system. The Authority needs to put

measures in place to ensure that the balances from the old systems are

verified and integrated into the TAMIS system as soon as possible, so that

taxpayers’ information is located on one system, and that it provides

accounting information that is complete and up-to-date as this is currently

not the case.

CHAPTER 3


CHAPTER 3

PROCUREMENT OF LEGAL FEES BY STATE-OWNED ENTERPRISES

____________________________________________________

Introduction

overnment entities have been paying considerable amounts of

money for the acquisition of legal services from attorneys in the

private sector. This audit examined in detail whether some of

these entities have adequate procurement policies in place to ensure that

there is transparency in the process for acquiring these services, and that

there was a clear basis for determining the fees charged.

3.2 The Barbados Audit Office requested fifty-four (54) State-owned

Enterprises (SOEs) to submit information on the selection process used,

and the legal fees paid out to external attorneys over the past eleven (11)

years. Thirty-seven (37) responses were received and, based on the value

of legal fees paid, eight (8) entities were selected for further review.

Audit Scope and Objectives

3.3 The main objective of this audit was to determine whether State-owned

Enterprises (SOEs) had implemented systems to facilitate the procuring of

legal services from attorneys/firms in a cost-effective manner. This was

achieved through the evaluation of the processes used in selecting the

attorneys/firms, the basis on which the rates/fees were agreed, and the

terms and conditions of the engagements. The review focused on the period

1st April 2007 to 31st August 2018.

G

CHAPTER 3


Methodology

3.4 In order to provide reasonable assurance on the stated objective,

information pertaining to the engagement of legal services was obtained

and reviewed from the following agencies: -

Financial Services Commission (FSC)

Sanitation Service Authority (SSA)

Fair Trading Commission (FTC)

Needham’s Point Holdings Ltd (NPHL)

Barbados Tourism Investment Inc. (BTII)

Barbados Investments & Development Corporation (BIDC)

National Petroleum Corporation (NPC)

Barbados Agricultural Development & Marketing Corporation

(BADMC)

3.5 Interviews were conducted with key personnel of the above agencies, and

files and other relevant documentation provided were reviewed.

CHAPTER 3


SUMMARY OF FINDINGS

Selection of Attorneys

3.6 The review revealed that some attorneys/firms engaged by the SOEs were

selected by Cabinet, others by the Board of Management and/or the

Minister responsible for the SOE. However, the Auditors were not provided

with a clear basis for the selection of the legal counsel by these

agencies/authorities. The engagement of the attorneys/firms was stated to

be due to the absence of legal counsel on staff at some agencies; and the

complexity and volume of legal matters to be dealt with, for others.

Basis for Fees

3.7 The total amount of fees reported as paid by the entities who submitted

information was over $7 million, with the amount of fees paid to individual

attorneys/firms, ranging from $500 to $4 million for work done over the

review period. Generally, there was an absence of evidence to indicate that

the basis or rates/fees paid to the attorneys were agreed on prior to services

being provided.

3.8 Four (4) of the eight (8) agencies examined indicated that fees charged

were generally based on the Legal Profession (Attorneys-at-Law)

(Remuneration for Non-Contentious Business) Rules, 1997 (hereinafter

referred to as the Legal Profession Rules or the Rules). However, there are

legal services which are not explicitly captured in the stated Rules resulting

in the basis of the rates/fees not being established in these instances.

CHAPTER 3


3.9 Another two (2) agencies indicated that the General Counsel on staff was

responsible for verifying the fees. Whereas, the other two (2) agencies

provided no information on the basis for the fees charged by the attorneys.

3.10 The detailed findings of the review on the individual entities are outlined

below.

DETAILED FINDINGS

A. Barbados Investment & Development Corporation

BIDC/the Corporation)

3.11 The BIDC indicated that it engaged its external legal counsel through a

number of methods. These were public tendering, selection from a list of

Legal Retainers recommended by Cabinet, and the direct selection by the

Board or the Minister responsible for Trade and Industry. The Corporation

also indicated that it engaged the services of the attorneys based on their

expertise and experience, as well as the skill set required at the time.

However, BIDC provided no evidence to verify that the methods of selection

were followed for the eight (8) attorneys.

3.12 BIDC engaged the services of eight attorneys and paid them a total of

$313,887.00 during the period reviewed. The Corporation informed the

Audit that the rates/fees paid to the external counsel were based primarily

on the Legal Profession Rule but for other attorneys, “an hourly rate was

charged and other costs were assessed by the courts”. In other instances,

CHAPTER 3


it paid a percentage of the debt recovered from rentals to attorneys. The

BIDC’s Legal Officer was responsible for negotiating, as well as assessing

the fees payable to external counsel through verifying the work done.

3.13 A sample of fourteen (14) invoices and other supporting documentation

were reviewed for evidence that the fees charged by the external counsel

were verified by the BIDC’s Legal Officer. The Audit observed that, for the

majority of the invoices examined, there was no evidence of verification by

the Legal Officer. Additionally, the Auditors were unable to verify the basis

on which the fees were paid to some attorneys or ascertain whether there

was an agreement on the fees prior to their engagements.

Use of the Legal Profession Rules

3.14 The Legal Profession Rules were at times quoted as the primary source for

which legal fees were charged. However, the Audit was unable to verify

some payments, as there were legal services for which the fees were not

outlined in the Rules.

Audit Comment

3.15 There was the absence of evidence to determine the basis for selection of

attorneys engaged to perform work for the BIDC. In addition, the basis for

the legal fees charged was not often agreed upon prior to the engagement

of the external legal counsel. The BIDC’s Legal Officer played a critical role

in the reviewing and verification of fees charged by the external legal

counsel. However, it was not evident that a verification of charges in relation

to work completed was always undertaken.

CHAPTER 3


B. Needham’s Point Holdings Limited (NPHL)

3.16 The NPHL identified nine (9) attorneys/firms whose services were

employed to deal with legal issues that arose during the period reviewed.

These attorneys/firms received a total of $1.03 million during the review

period.

3.17 After NPHL engaged the attorneys, they were paid on the submission of an

invoice for work completed or performed. However, with the exception of

two (2) attorneys, the NPHL did not provide any evidence that the parties

had agreed before their services were engaged to the rates/fees claimed by

the other attorneys. It is a prudent business practice for parties to agree on

fees or a basis for their computation prior to the engagement of counsel, as

this avoids the possibility of the agency being overcharged or having to

negotiate fees with the engaged party after work has been completed.

3.18 Personnel from NPHL indicated that when claims submitted were

considered excessive, they were reviewed by Management or the Financial

Controller and the fees negotiated with the attorneys. This assessment,

albeit after the fact, was stated to be based on the fees outlined in the Legal

Profession Rules. A review of a sample of invoices revealed that the

description of services recorded on the invoices could not be matched to

anything outlined in the Legal Profession Rules.

Audit Comment

3.19 The ability of the NPHL to make a reliable assessment of the fees would

have been challenging especially, where the fees were not stated in the

CHAPTER 3


Legal Profession Rules. In such instances, it is not clear how the fees

claimed were determined.

C. Barbados Tourism Investment Inc. (BTII)

3.20 The BTII indicated that it had no legal officer on staff; therefore, the services

of an attorney were engaged to provide legal services for the agency. This

attorney was engaged as the legal counsel of the BTII by the Board in 2008

and for the period 2009 to 2018 by the Cabinet. The attorney was paid

$3.974 million during this period for his services which included reviewing

and advising on agreements/contracts, purchase/sale of land/property, and

matters which were before the court.

3.21 The attorney was paid after the submission of an invoice for work

completed. However, BTII provided no documented evidence that

fees/rates were discussed or negotiated before the services of the attorney

were engaged. The Chief Executive Officer (CEO) indicated that after the

work was completed by the attorney, the rates/fees were assessed using

the Legal Profession Rules, with negotiations entered into where amounts

were considered excessive. No information was provided by the BTII to

allow the Auditors to verify that this process occurred.

3.22 On examining a sample of eight (8) invoices, two (2) instances were found

where the rates/fees were according to the Legal Profession Rules. These

related to the sale/purchase of land/property. In the other instances, a

determination could not be made as to whether the fees were based on the

CHAPTER 3


Legal Profession Rules as the services recorded on the invoice were not

defined therein.

Audit Comment

3.23 Based on the review of the information provided by the BTII, the fees

charged by the legal counsel were not agreed to prior to the commencement

of work. With this type of arrangement, there is a high risk that the fees

charged might not be reasonable in all instances. The BTII should not be in

a position where it has to negotiate fees with counsel after work has already

been completed. In any event, since there was an absence of legal staff at

the BTII, it is doubtful whether its staff was in a position to assess the

reasonableness of the fees charged.

D. Barbados Agricultural, Development & Marketing

Corporation (BADMC)

3.24 The BADMC reported that there was no legal officer on staff, and as a result

the services of various attorneys were engaged when required. The

Auditors were informed that the Board selected the attorneys who were

involved in matters relating to land leases and transfers, or to advise on

disciplinary matters. No clear basis was established for the selection of

attorneys. As a result, there was the absence of transparency in this

process.

CHAPTER 3


3.25 Personnel from the BADMC indicated that the Board engaged the legal

services of twelve (12) attorneys/firms during the period reviewed. These

attorneys were paid over $222,000 during this period.

3.26 The BADMC did not provide the Audit with the terms and conditions under

which it engaged the legal services of the attorneys/firms. The Agency

indicated that it paid the attorneys for work completed or performed.

However, there was no evidence that the parties agreed to the fees or the

basis for the fees prior to the receipt of invoices from the attorneys. The

rates/fees claimed were stated to be based on those prescribed in the Legal

Profession Rules. However, there were services which were not stated in

these Rules. In these instances, there was no clear basis on which the

rates/fees were made.

3.27 The BADMC also stated that management at times consulted with the

attorney/law firm when the rates/fees were not explicitly outlined in the Legal

Profession Rules. In these cases, the BADMC personnel indicated that the

attorneys were contacted by the Board and asked to provide more details

with respect to the work performed and the time allocated, in order for a

proper assessment to be made. The BADMC did not identify any payments

where this process was followed. In any event, it would have been expected

that fees or the basis for the fees would be established prior to the start of

any work. This is a good business practice that would add certainty in

respect of the amounts due for services performed.

CHAPTER 3


E. Financial Services Commission (FSC/Commission)

3.28 The FSC has had a General Counsel on staff from its inception to provide

support on legal matters. However, the Commission informed the Audit that

the Board acquires the assistance of an external legal counsel when the

agency is served with court proceedings, threatened with litigation, or

contemplating court proceedings. The Commission engaged four attorneys

and made payments totaling $994,452 for their services during the period,

1st April 2011 to 31st August 2018. No basis was provided for the selection

of attorneys.

3.29 The Auditors requested documentation to verify that the attorneys were

selected by the Board as stated. They were however only provided with

documentation to substantiate the selection process of two attorneys. No

documentation was provided to indicate that the rates/fees claimed by three

other attorneys were negotiated or agreed to before their services were

engaged. As a result, there was the absence of transparency with these

payments.

3.30 The FSC stated that its General Counsel reviewed and verified the work

done and the rates with respect to claims submitted by the external legal

counsel. This was reportedly evidenced by this Officer’s signature on the

invoice. However, in the majority of cases, this process was not followed.

CHAPTER 3


Audit Comment

3.31 Fees/rates should be determined prior to the start of any work. This would

add certainty to the financial arrangements and avoid situations of over

invoicing or other related disputes that may arise.

F. Fair Trading Commission (FTC)

3.32 The Fair Trading Commission has a legal team that deals with legal matters

for the Commission, except where a matter was considered beyond the

team’s scope and expertise. In such cases, the service of an external

counsel is engaged, as legislated by the Fair Trading Commission Act CAP

326B, Section 12 (1) & (2).

3.33 During the review period, the services of two (2) external counsels were

engaged by the FTC to provide legal representation in two (2) cases. These

attorneys were paid $176,250 during the review period. The FTC however

did not provide all the requested documentation to verify the basis on which

the rates/fees were agreed upon with respect to one engagement or how

the attorneys were selected.

3.34 The engagement of the other firm was supported by an engagement letter

(agreement). Such details as the work, estimated fees, and factors that may

influence the fees charged were documented. Invoices submitted by the

firm were signed off by the General Legal Counsel, evidencing the review

and evaluation of the submissions made. The basis on which the rates/fees

CHAPTER 3


were agreed upon, and the process of review and assessment were

evident.

G. Sanitation Services Authority (the Authority)

3.35 The Audit was informed by Management of the Authority that prior to

November 2008, Cabinet selected the legal counsel at the Authority and,

after this period, the Minister responsible for the agency selected the

attorney. However, in the majority of cases, the Authority did not present

the Audit with any evidence to verify that the aforementioned parties

selected the attorneys engaged. No clear basis was established for the

selection of the attorneys. As a result, there was the absence of

transparency in this process.

3.36 During the review period, four (4) attorneys were paid a total of $3.937

million for providing legal services to the Authority. It was stated that the

invoices submitted by the attorneys were reviewed and signed by the

Chairman. However, there was no evidence that the rates/fees and work

performed were actually verified. Neither was there evidence that the

rates/fees paid to the attorneys were known or agreed upon before their

services were engaged. There should be certainty about fees or basis for

fees prior to the commencement of any work to avoid any disputes and

chances of over invoicing.

3.37 The Authority paid $1.5 million to an attorney relating to a claim for $5.8

million for work purportedly conducted during the negotiation process for a

Waste to Energy Project. A part-payment of $700,000 was made to the

CHAPTER 3


attorney on a directive from the Ministry of Finance. Another payment of

$800,000 was made directly from the grant approved by Parliament for the

Authority by the then Ministry of Environment and Drainage. Management

of the Authority indicated that they were unaware of this latter payment and

that there were no contractual arrangements between the attorney and the

Authority. It was unclear what specific services were provided by the

attorney to the SSA and what was the exact involvement of the Authority in

this project.

3.38 According to a letter dated 19th June, 2014 from the Ministry of Finance to

the Ministry of the Environment, the sums paid to the attorney were to be

reimbursed to the Authority/Ministry of Environment by the contracting firm

under Clause 5.8 of the Agreement for the Waste to Energy Project. This

was an unusual arrangement in that the Authority was making payments on

behalf of the contracting Firm and then seeking reimbursement from this

Firm. It should be noted that the amount of $1.5 million was not recovered.

This payment process lacked transparency and those responsible for it

should be held to account for any resulting loss to Government.

3.39 Another attorney was engaged as the legal counsel for the SSA in June

2009 after being selected by the Minister of the Environment. This attorney

was paid the sum of $1.04 million with respect to the drafting and perusing

contracts and other legal matters, during the period he was retained by the

SSA. No evidence was presented to indicate that the rates/fees were

negotiated before the services of the attorney were engaged. Furthermore,

no documentation was provided by the SSA to support the terms and

conditions of his particular engagements.

CHAPTER 3


3.40 The attorney was also paid $1.13 million, inclusive of VAT, for “legal fees

with respect to service provided to the Sanitation Service Authority relating

to a contract for the Design, Build, Operate, Finance and Transfer of a

Leachate and Liquid Waste Treatment Plant”. This payment was made

directly by the Ministry of Environment and Drainage, during the financial

year 2015/2016, from the funds approved by Parliament for the SSA. The

legal fees submitted were calculated as three percent (3%) of the contract

amount of $32 million. No evidence was presented to verify that there was

consultation with the attorney with respect to the legal services and fees

before he was engaged. Furthermore, no evidence was provided to indicate

what service was provided by the attorney.

Audit Comment

3.41 Overall, the method of selection and the fee payment process lacked

transparency and needs to be reviewed. There was no certainty that the

Authority received full value for money for these engagements.

H. National Petroleum Corporation (NPC)

3.42 The NPC reported that it engaged the services of three (3) attorneys during

the period under review. The attorneys were paid $375,128 over the period

reviewed. The NPC indicated that attorneys were either selected by the

Board of Directors or by Management with notification being sent to the

Board.

3.43 The NPC presented no documentation to support the rationale for the

selection of attorneys mentioned. The invoices needed to verify the list of

CHAPTER 3


payments were not provided, nor was any documentation to support the

terms on which the attorneys were employed. As a result, the Audit was

unable to determine the methods employed by the NPC in acquiring legal

services during the period reviewed, and the reasonableness of the

charges.

Conclusion

3.44 There were significant deficiencies observed with regards to the selection

methods employed for the engagement of attorneys by State-owned

Enterprises, the establishment of terms/conditions for engagements, and in

the verification of fees. In the majority of the cases examined, the agencies

did not provide evidence for the basis of the selection of the attorneys. In

addition, no clear and defined policies were in place to guide the

engagement process. In this regard, there was a lack of transparency with

regard to the engagement and selection processes.

3.45 During the period reviewed (April 1st, 2007 to August 31st, 2018), the

services of twenty-five (25) attorneys/law firms were engaged and paid

based on work performed without first determining a basis for the fees. This

resulted in a number of cases in which management sought to negotiate

fees submitted for payment after the services had been provided.

3.46 There were services (such as drafting letters, researching, reviewing and

advising on legal matters) which were not defined in the Legal Profession

(Attorneys’-at-Law) (Remuneration for Non-Contentious Business) Rules,

1997. Unless there is a clear basis on which to gauge the claims submitted

by the attorneys, determining whether fees are reasonable would be highly

CHAPTER 3


subjective and can lead to overcharging and payment disputes which could

be avoided.

3.47 There should be better management of the process of engaging the

services of attorneys/firms given the specified nature of the services

rendered and the sums paid. There is no certainty that the public interest

was served in all instances where attorneys were engaged.

Recommendations

3.48 It is recommended that:

There should be a clear and defined written policy in place to properly

manage the selection of attorneys/law firms engaged by State-

owned Enterprises. Such a policy should promote transparency in

terms of the selection process used.

On engaging the services of an external legal counsel, the terms and

fees, or their basis, should be negotiated and documented before

work commences. This eliminates the need to seek consultation or

to negotiate with the attorney, post facto.

There should also be better management of the payment process as

attorneys/firms should not be paid without work performed being

verified and duly authorized.

CHAPTER 4


CHAPTER 4

PROCUREMENT PRATICES OF THE

BARBADOS WATER AUTHORITY

____________________________________________________

EXECUTIVE SUMMARY

______________________________________________________________________

Introduction

The Barbados Water Authority (BWA) is one of the largest Statutory

Agencies in Barbados, with an annual budget in excess of BDS$100 million,

and a staff complement of over eight hundred (800). It was established by

the Barbados Water Authority Act, CAP. 274. The main function of the BWA

is to provide potable water to domestic and commercial customers in

Barbados and, as such, it has entered into a number of arrangements with

contractors to help achieve this mandate.

4.2 It has been estimated that forty-nine percent (49%) of the water pumped by

the Authority was unaccounted for and this was partly due to faulty meters

and undetected burst mains. As part of its efforts to reduce this loss and

gain greater efficiency, the BWA has been pursuing major capital works

projects, and these activities, valued at BDS $1.49 billion have triggered a

need for a review of its current procurement practices.

4.3 This review therefore sought to determine if the BWA was pursuing

procurement practices in line with its policies, as well as the requirements

of the Financial Management and Audit (Financial) Rules, 2011. The audit

CHAPTER 4


also sought to determine whether the Authority was achieving value for

money from these projects, taking into consideration its financial resources

and commitments.

Tender Process

4.4 Of the BDS $1.49 billion in goods and services which the Authority sought

to acquire, it was observed that approximately ninety percent (90%) of these

arrangements did not go out to public tender. This was in breach of the

Barbados Water Authority (BWA) procurement rules and the Financial

Management and Audit (Financial) Rules, 2011, which have been adopted

by the Authority. These require a tender process for the acquisition of goods

and services costing more than BDS$200,000. There was no certainty

about the origins of a number of these bids as no evidence was provided to

indicate that they were requested by the Authority.

4.5 The public tender process provides an opportunity for all qualifying firms

to submit bids, which increases the chances of the Authority being able to

obtain the best possible price the market has to offer, all things being equal.

In the absence of a public tender process, it was not clear what basis the

Authority had for accepting the submissions and how it determined that the

services were reasonably priced. Without such a tender process it was not

evident that BWA chose the best option available. In short, the procurement

process lacked transparency.

Acquisition of Smart Meters

4.6 The Authority sought to replace the existing water meters with a type that

would allow for remote reading and to change those that were faulty. In this

CHAPTER 4


regard, a contract for the supply of ninety-eight thousand, eight hundred

(98,800) smart meters was awarded to one Firm for an amount of

€10,372,024 as stated in the bid document. However, it was subsequently

assigned to another Firm for €11,188,112 which was €816,088 more than

in the bid document. There was no evidence of any additional good or

service being provided or any agreement of an adjustment to the price by

the contracting parties. There was however no justifiable reason provided

by the Authority for the payment of this additional sum.

Payment for Consultancy Services

4.7 It was observed that the equivalent of BDS$5.50 million was paid to an

overseas firm in respect of an invoice for “previous expenses, fees,

reimbursable expenses and commissions for the Smart Meter Project for

Barbados”. The Audit sought to clarify the nature of the services outlined

and to verify whether they were actually performed. However, in discussion

with Management from the Authority and the previous Chairman, there was

no confirmation that any service was performed. This is a very serious

matter which needs to be investigated by the relevant legal authorities.

Protective Meter Boxes

4.8 BWA entered into a contract with a Company on the 5th December 2014 for

the supply of one hundred thousand (100,000) water meter boxes at a cost

of US$2.20 million. The payments to this Company were initiated by the

previous Chairman writing to one of the Authority’s banks, instructing that

the funds be paid into the Company’s bank account. This was an unusual

CHAPTER 4


occurrence as payment for goods was normally carried out by members of

the Accounts Department after certification that the goods were received.

4.9 The Director of Engineering and the Technical Advisor to the Board

indicated that to install this particular type of boxes would require the meters

being disconnected and reinstalled, a time consuming and costly process.

This would indicate that the acquisition of these boxes was not carefully

thought through. For the last four (4) years these boxes have been stored

in an open area at the Belle Pumping Station. This large expenditure has

so far not resulted in any apparent benefit to the Authority.

Construction of Reservoir at Grand View

4.10 The Authority entered into an arrangement with a Firm for the reconstruction

and provision of additional storage capacity of the Grand View Reservoir in

St. Michael. The initial cost of the reconstruction was estimated at $6 million.

There was no clear basis for selection of this Firm to reconstruct the

reservoir; hence the selection process was not transparent. In addition,

there was no evidence that the Authority sought to find other Firms to

reconstruct the reservoir.

4.11 Subsequently, the Firm assigned the engagement to another Firm, and a

revised reconstruction cost was set at BDS$23.93 million inclusive of

interest of $7.7 million. The high financing cost was not in the best interest

of the Authority.

CHAPTER 4


Desalination Plants

4.12 The Authority, in an effort to improve the national water supply, sought to

establish a number of desalination plants across the Island. The Authority

entered into two (2) contracts for the provision of permanent Seawater

Reverse Osmosis Desalination Plants costing $40.25 million and $40.42

million per annum respectively.

4.13 Based on its financial commitments and the need to replace aging

infrastructure, the Authority will find it difficult to meet such additional

expenditure annually. No evidence was presented to indicate that these

contracts were discussed with the Ministry of Finance and Economic Affairs,

who would be ultimately responsible for any repayment outside the

capabilities of the Authority. The Authority needs to focus on business

solutions that are within the realms of its resources, or which have been

provided with guarantees by the Government before proceeding with any

projects.

Supply of Pipes and Fittings

4.14 The Authority entered an agreement with a Firm for the supply of pipes and

pipe fittings, even though this Firm was deemed ineligible as it did not

conform to the required specifications. Based on an instruction from the

previous Chairman, after a recommendation by the then Minister of

Agriculture, the Firm was awarded the contract to provide the pipes and

fittings. The contract price was BDS$3.80 million, plus finance charges of

BDS$1.48 million to be paid over thirty-six (36) months. This was a very

high interest payment on such a relatively small purchase. From a financial

CHAPTER 4


perspective therefore, this agreement was not in the best interest of the

Authority.

Conclusion

4.15 BWA is operating in an environment of water scarcity and aging

infrastructure that needs replacing. It is also operating with limited financial

resources and, as a result, must use its funds prudently. Our review

indicates that the Authority has entered into several contracts that have the

potential to increase its operational costs beyond its capabilities. It is my

understanding that some of these contracts are being renegotiated.

4.16 These Projects raised a number of concerns about contracts and their

management at the Authority. There seemed to be little or no adherence to

the Authority’s procurement rules and a lack of sufficient financial and

technical analysis of proposals prior to the selection of suppliers of goods

and services. The manner in which a number of these contracts were

initiated and awarded lacked transparency. In the majority of instances

there was no tender process, and there was inadequate information for

determining how the contracted amounts were arrived at, or how the

procurement process was initiated.

4.17 The rationale for payment to the Firm for consultancy services has not been

explained and there was no evidence of any service being provided.

Appropriate legal action should be taken on those responsible for this

transaction.

CHAPTER 4


Recommendations

4.18 It is recommended that: -

i. BWA ensures that the terms of its procurement guidelines are adhered

to. This requires a commitment from the Chairman and the Directors

of the Board, Management and the responsible Ministry to ensure this

is achieved.

ii. The Chairman should not be making decisions that require full Board

approval.

iii. The Authority should ensure that awards of contracts are made after a

rigorous competitive selection process rather than accepting

unsolicited bids.

iv. BWA should ensure that it obtains all the necessary guarantees from

Government before committing itself to any agreement for which it

does not have the necessary resources.

v. The issue of the payment for the consultancy ‘services provided’ needs

to be investigated. If no service was received, legal action should be

taken against all those involved in this matter.

vi. The BWA decides what is to be done with the meter boxes stored at

the Belle Pumping Station and ensure that there is no recurrence of

such purchases. The parties responsible for this state of affairs should

be held to account.

CHAPTER 4


vii. The Authority also needs to be prudent in taking on any new debt and

seek to renegotiate those contracts with onerous terms.

CHAPTER 4


INTRODUCTION

4.19 Between 2010 and 2018, the Barbados Water Authority (hereinafter

referred to as BWA/the Authority) entered into a number of arrangements

with contractors and suppliers for the provision of goods and services at a

cost of approximately BDS $1.49 billion as outlined in the table below.

Cost of Contracts/Agreements

Particulars Contract Amount BDS ($)

Debushing and continuous maintenance of pumping stations and reservoirs; routine debushing, landscaping and maintaining fifty-four (54) pumping stations

888,075.00

Debushing and continuous maintenance of pumping stations and reservoirs; routine debushing, landscaping and maintaining fifty-four (54) pumping stations

2,209,293.76

Supply of pipes and fittings over a three (3) year period at an interest rate of 13% per annum. Interest would be $1.48 million over the period

5,288,025.34

Supply and maintenance of Community Water Tanks. Contract is for $67,000 per month for five (5) years

4,020,000.00

Construction of Reservoir at Grand View (financed with a ten (10) year loan) 23,929,914.16

Supply of Desalinated Water at Trents, St. James

11,540,850.00

Drill and construct five wells at Trents St. James 1,115,649.58

Supply of Desalinated Water at Hope, St. Lucy.

10,972,150.00

Seawater Reverse Osmosis Desalination Facility at Harrisons Point, St. Lucy at $40,023,542.10 per year for 15 years

600,353,131.50

Drill, construct and develop exploratory wells; analyse the information obtained from the wells and make recommendations to the Authority based on the information obtained from the wells. Contract is for fifteen (15) years at an estimated average cost of $4.58 million per year

68,719,670.55

Design, Finance and Construction of Pipelines and Works. Contract is for $153,319.60 per month for eighty-four (84) months.

12,878,463.40

Seawater Reverse Osmosis Desalination Plant at Gibbons/Ealing Grove, Christ Church at $40,421,786.30 per year for 15 years

606,326,794.50

Acquisition of 101,200 residential smart meters and 5,530 commercial meters 33,134,723.23

Installation of Smart Meters including the Automatic Meter Reading (AMR) system

33,499,390.42

Project Management/Consultancy Services 7,200,000.00

Design, production, supply and delivery of 100,000 water meter boxes for protection of the Diehl Hydrus Smart Meter

5,144,000.00

CHAPTER 4


Particulars Contract Amount BDS ($)

Provision of the Management Information Systems namely, Customer Information System, Workload Management System and the Financial Information System

54,000,000.00

Design, project financing, contract negotiations and technical requirements consultancy

5,500,000.00

Supply of 16,400 Itron Smart Meters including the Automatic Meter Reading (AMR) system

4,895,720.00

TOTAL 1,491,615,851.44

Audit Objectives

4.20 The main objective of the Audit was to determine if the BWA had complied

with its Procurement Procedures and Financial Directives, and the Financial

Management and Audit (Financial) Rules, 2011 as well as its effectiveness

in achieving value-for-money in respect of the acquisition of goods and

services.

Audit Scope and Criteria

4.21 The Audit covered all aspects of the procurement process, which included

planning, sourcing and contract management for twenty (20) projects, some

of which commenced as early as 2010.

4.22 The Audit criteria were drawn from the Procurement Procedures of BWA,

the Financial Management and Audit (Financial) Rules, 2011 and the

contracts/ agreements of the BWA.

Methodology

4.23 During the audit, information was collected through: -

CHAPTER 4


Interviews with Technical and Managerial staff from the Barbados

Water Authority, current and previous Chairpersons, and contractors;

Reviews of the relevant files, documents and papers; and

Analysis of the information gathered through the above methods.

Audit Mandate

4.24 The Audit was conducted in accordance with Section 113 (2A) of the

Barbados Constitution. Under this Section, the Auditor General may, on his

own initiative, carry out examinations into the financial management of

Ministries, Departments, Statutory Authorities and Government controlled

entities, including the manner in which entities use their resources in

discharging their functions as regards the efficiency and effectiveness of

these resources.

CHAPTER 4


SMART METERS PROJECT

Background Information

4.25 The BWA undertook a Smart Meter Project (the Project) which consisted

primarily of the installation of smart meters and software systems which

would have enabled the Barbados Water Authority to achieve the following:

accurately and fully capture and maintain information on its customers

and their water consumption;

improve leaks’ detection;

implement computerised meter reading and enhance the Authority’s

revenue base through more accurate billings;

computerize and reform the accounting and customer service

systems; and

provide training in change management.

4.26 This project was part of a broader reform effort of the Authority to modernise

and improve its operations. It was estimated that the project would cost over

BDS$200 million.

4.27 The upgrade of the meter systems involved the procurement and installation

of residential and commercial smart water meters, and the provision of an

integrated Information Technology System. Contracts were entered into for

the following:

The supply of one hundred and one thousand, two hundred (101,200)

residential Diehl smart meters;

CHAPTER 4


The supply of five thousand, five hundred and thirty (5,530) commercial

Diehl smart meters;

The installation of the smart meters and the supply and installation of

the Automatic Meter Reading (AMR) system;

The supply of one hundred thousand (100,000) meter boxes;

The supply of sixteen thousand, four hundred (16,400) Itron smart

meters;

Consultancy services;

Project Management Services;

The purchase and installation of “hardware and purchase of software

and relevant licences”; and

A Loan of US$67.91 million from a bank.

4.28 The Audit found that, with few exceptions, the BWA did not comply with its

procurement procedures or those it stated it had adopted from the Financial

Management and Audit (Financial) Rules, 2011 in relation to the award of

these contracts for the smart meter project. Below are the main findings of

the Audit of the smart meter project.

No Public Tendering

4.29 There was no evidence of any tendering or competitive selection process

taking place for a number of the above mentioned services. It was noted

that there were four (4) unsolicited bids received and accepted by the

Authority as follows: -

The submission of US$2.75 million proposal for the contract for

consultancy/project management services;

CHAPTER 4


Submission of a proposal for the supply of one hundred thousand

(100,000) meter boxes for US $2.20 million

Submission of a proposal valued at US$13.50 million to install eighty-

two thousand (82,000) smart meters inclusive of providing ‘project

management services’; and

The submission of US$2.70 million by an accounting firm to provide

consultancy and project transformation management services.

4.30 It was not clear what basis the Authority had for accepting these bids. There

was also a lack of information on how these bids were initiated, or how the

Authority determined that the services were necessary and reasonably

priced. Without such a process it would not be evident that the service being

purchased was the best option available.

4.31 In addition to the submissions above, there was no public tendering for the

purchase of sixteen thousand, four hundred (16,400) smart meters for

US$2.45 from a Firm. In this instance, the General Manager requested that

this Firm submit a proposal for the supply of these meters.

Tender for the Supply of 98,800 Smart Water Meters

4.32 In 2012, the Barbados Water Authority invited tenders for the supply of

ninety-eight thousand, eight hundred (98,800) smart water meters under a

project funded by international financial institution. Five (5) bids for this

procurement were received and four (4) were publicly opened on the 4th

June 2012. One bid did not meet the criteria and therefore was not

accepted. The acquisition of the meters was to be part funded by a loan

CHAPTER 4


from an international financial institution to the tune of US$6.80 million at an

interest rate of 1.5%.

4.33 Under the terms of the loan agreement, these tenders should have been

evaluated by an Evaluation Committee, and the results forwarded to the

financial institution for its approval prior to the award of the contract. The

Committee was duly set up by the BWA and agreed to by the financial

institution.

4.34 It was observed that before the Evaluation Committee met, the BWA

commissioned an independent technical evaluation, which was carried out

by a Consultant. This Consultant recommended that the Diehl Hydrus smart

water meter be purchased. Based on this recommendation, the BWA’s

Board of Directors entered into a contract with a Firm for the purchase of

ninety-eight thousand, eight hundred (98,800) of these smart water meters.

The offer to the Firm was made on the 29th August 2012 and accepted on

29th August 2012. The BWA did not seek the financial institution’s “non-

objection” prior to awarding the contract as was required which resulted in

the institution’s withdrawal of the US$6.80 million in funding.

Audit Comment

4.35 It was unusual for the Board to have finalized the contract while its

Evaluation Committee was still reviewing the bids. This suggests that the

procurement process was not being followed and the recommendation of

this Committee was not relevant to the making of the decisions for this

project.

CHAPTER 4


Agreement Assigned at a Higher Amount than it was Awarded

4.36 An Agreement was entered into with a Firm to supply the ninety-eight

thousand, eight hundred (98,800) residential meters for €10,372,024, the

amount submitted in the firm’s bid. However, the Firm assigned the

agreement to another Firm. The BWA then entered into a contract with this

second Firm for the supply of the water meters at a cost of €11,188,112.

This resulted in the Authority paying an additional €816,088. No justification

was provided by officials from the Authority for this increase in price. The

persons responsible for approving these arrangements should be held to

account.

Contract for 5,530 Commercial Smart Meters

4.37 In addition to the supply of domestic meters, the BWA also awarded another

contract to the Firm mentioned above for the supply of five thousand, five

hundred and thirty (5,530) commercial smart meters. This contract went out

to tender; however, there was no evaluation of the bids by the Evaluation

Committee. Instead, the selection of the Firm was based on a report from a

Consultant. The contract amount for these meters was BDS$2.29 million.

The Board of the BWA in this instance did not let the tender process run its

course before intervening.

Deficiencies in Performance Bonds

4.38 The Authority entered into a contract with another Firm to install the smart

meters. Each of the parties was to obtain a performance bond for

CHAPTER 4


US$337,606. This bond was a safeguard to the Authority to ensure

compliance with the terms of the contract. It was noted that the performance

bonds were not signed by either of the parties and did not appear to be

valid.

Encryption Codes for Water Meters

4.39 As part of its reform process, the BWA sought to automate the meter

reading process and improve its accuracy. In this regard, the BWA sought

to procure smart water meters which would allow information produced to

be automatically downloaded to hand-held walk/drive-by units. The

information obtained from the meters would then be transmitted

electronically to the Authority’s Information Systems to allow for billings to

be generated, and provide information to be used by the Customer Service

Department. A critical component of this process is the acquisition of the

encryption codes which would facilitate the reading of the information

downloaded from the smart meters.

4.40 The absence of the encryption codes have not allowed the meters to be

read remotely as envisaged. The Supplier of the meters and the Authority

are currently in dispute in respect of the codes. The Authority is indicating

that the codes were part of the original contract and should be provided by

the Supplier without any further payment. However, the Supplier of the

meters is indicating that the contract was only for the supply of the meters

and not for the supply of the encryption codes which must be paid for

separately.

CHAPTER 4


Audit Comment

4.41 The origins of this problem relates to an apparent lack of clarity in the

contract for the supply of the meters. Unless this matter is resolved the

meters will continue to be read manually and a key reform effort, reading of

meters remotely, would not have been achieved.

Duplication of Provision of AMR Equipment in Contracts

4.42 The BWA signed an agreement on 16th October 2013 with a Canadian

Agency which included the provision of the Automatic Meter Reading (AMR)

equipment which would facilitate the smart meters being read remotely. A

month later (19th November 2013), the Authority signed a contract with the

Firm installing the meters which also included the provision of the AMR

equipment for the said smart meters.

4.43 The Canadian Agency, upon recognizing that the acquisition of the “AMR

equipment” was being provided by another vendor removed the supply of

the “AMR equipment” from its scope of works in April 2016.

4.44 The Firm installing the meters had also included the cost of the provision of

the AMR equipment in the price for the installation of the smart meters.

However, the previous Chairman of the BWA agreed to “the omission of the

works pertaining to the supply and installation of the drive-by/walk-by AMR

system for domestic meters and the fixed network for two hundred (200)

large customers valued at US$673,850” from the contract with the Firm.

Based on how the original contract was written, there was no set value for

the “system”. It was therefore not clear how the figure of US$673, 850 was

arrived at.

CHAPTER 4


Audit Comment

4.45 It is not clear why the BWA would have contracts with two (2) Firms for the

provision of the AMR equipment or why these Firms did not fulfill their

contractual obligations. This equipment has not been installed to date and

contributes to the situation where the meters cannot be read remotely.

4.46 Not receiving the AMR equipment and the encryption codes has contributed

to the BWA continuing to use the manual system which was fraught with

errors in the past. The matters highlighted above reflect poor contract

management by the BWA in respect of this aspect of the project.

Acquisition of 16,400 Itron Meters

4.47 The Authority signed a contract on the 9th March 2018 with a Firm to supply

sixteen thousand, four hundred (16,400) Itron smart water meters including

the encryption keys for US$2.45 million. It should be noted that there was

no tendering for these meters as the Firm was requested to submit a

proposal by the General Manager.

4.48 The Management of the Authority should adhere to its procurement policies

as this will ensure the Authority’s best interests is taken into consideration

with respect to its purchases. A competitive selection process allows for an

assessment of market prices and provides options that the Authority can

choose from in order to obtain the best value for monies expended.

CHAPTER 4


Payment of US$2.75 million for Consultancy Services

4.49 BWA entered into a contract with a Company on the 11th September 2013

for the “design, project financing, contract negotiations and technical

requirements” in the amount of US$2.75 million. The previous Chairman

signed the contract on behalf of the BWA, and a Director signed on behalf

of the Company.

4.50 Subsequent to the entering of the contract, the payment of US$2.75 million

was made to the Company based on an invoice dated 1st November 2013.

The invoice stated that this amount was for “previous expenses, fees,

reimbursable expenses and commissions for the Smart Water Meter Project

for Barbados.” However, based on the review of documentation provided

and interviews conducted, the Audit was unable to verify that any

consultancy services were provided by this Company.

4.51 The Audit conducted interviews with:-

Current and former employees of the Authority;

Board Members;

Officials from the firm providing consultancy for “project

transformation management services”;

The Technical Advisor to the Board who was previously the General

Manager (Ag) of the BWA; and

A Director of the Company.

4.52 In addition, the Audit reached out to another Director of the said Company,

who indicated that he would provide the Audit Office with information in

CHAPTER 4


relation to the services provided. To date, no information has been received

from this Director.

4.53 This matter was also discussed with the previous Chairman as well as

Management of the Authority. These parties indicated that they did not know

of any services provided by this Company. However, the previous Chairman

indicated that he would have looked into the matter and give an explanation

to the Auditor General. To date, no explanation of this transaction has been

forthcoming from the previous Chairman. In addition, the Auditors

requested but were not provided with any letters of offer or acceptance,

tender notice or tender documents, or any Board decision/s with regard to

the award of this contract.

Audit Comment

4.54 I am concerned that this payment was made by the Authority, without its

personnel being able to identify any services rendered. This implies that

there was a lapse of internal controls in respect to the payment of funds to

this Company and the possibility of fraud taking place. Those responsible

for this transaction should be held accountable.

Protective Meter Boxes

Contract for the Supply of Meter Boxes

4.55 BWA and a Company entered into a contract on the 5th December 2014 for

the supply of one hundred thousand (100,000) meter boxes at a cost of

US$2.20 million. The Audit requested but was not provided with any

CHAPTER 4


evidence of tender documents, letters of offer, letters of acceptance, or any

approval by the Board for this contract. There was no evidence that such

activities were undertaken.

4.56 The previous Chairman indicated that the Firm installing the meters had

recommended that meter boxes be purchased to cover the meters as some

were being damaged and/or destroyed. It was however not clear, from

information made available, who ordered the boxes and whether they had

been assessed to meet the specifications of the BWA. The Procurement

Manager indicated that the first time he was aware of the meter boxes was

when he received documents to clear the shipment from the Bridgetown

Port.

4.57 Based on the information provided, there was no evidence that a technical

analysis of the suitability of these boxes for installation was undertaken. The

then acting General Manager and Director of Engineering, informed the

Auditors that the meter boxes were not suitable as the meters would have

to be disconnected and reinstalled. Subsequently, the previous Chairman

of the BWA, stated to the Auditors that the boxes could be used. However,

documentation provided by him confirmed what the acting General

Manager and Director of Engineering had stated.

Audit Comment

4.58 For reasons stated above, it would be a very time consuming and costly

exercise to try to install these meter covers. Even if the meter boxes were

installed, to read the meters manually as is the current practice, the meter

box covers, which are bolted down, would have to be removed each time

the meter is being read. This would be a time consuming exercise. To date,

CHAPTER 4


some five years after the acquisition of these boxes, they have not been

used, resulting in millions of dollars in expenditure being made with no

apparent benefit to the Authority.

Instructions for Payment for the Meter Boxes

4.59 Instructions were issued directly to the Authority’s bank by the previous

Chairman to make payments to this Company for the supply of the meter

boxes. It was unclear why the previous Chairman would have issued these

instructions instead of the payment being processed through the Accounts

Department.

Storage of Meter Boxes

4.60 On the 9th January 2019, the Audit visited the Belle Pumping Station,

St. Michael, where the meter boxes are being stored. The meter boxes were

found on the grounds of the Belle Pumping Station in an open area and

some were damaged. The Audit could not carry out a count due to the

manner of storage and the adverse environmental conditions.

Governance

Lack of Board Involvement in Decision Making

4.61 It was observed that seventy percent (70%) of the contracts entered into by

the BWA for the Smart Meter project were signed by the previous Chairman

but there was no evidence in the Minutes of the Board that the other

CHAPTER 4


members had given their approval. In short, there was an absence of the

full involvement of the Board in these significant projects, with the previous

Chairman taking on the responsibility of the Board.

Payment without Evidence of Service Having Been Performed

4.62 There were two (2) instances where BWA paid the Contractor the full

amount of the contract price, either before the goods were delivered or there

being evidence that the service was performed. In both instances, the

previous Chairman, who had a fiduciary duty to act in the best interest of

the Barbados Water Authority, authorized the payments.

Conclusion

4.63 The Authority undertook an ambitious project to rectify certain deficiencies

and improve its operations. In this regard, it was partially successful. The

majority of the smart meters have been installed. In addition, there were

improvements in the sharing of customer information between the

Departments within the Authority as well as in the billing system.

4.64 However, there were several issues which impacted negatively on the

project. There seemed to have been little or no adherence to the Authority’s

procurement rules and a lack of sufficient financial and technical analysis of

issues prior to decision making. Furthermore, there was an absence of the

full involvement of the Board in the making of critical decisions relating to

this project.

4.65 The absence of public tendering shows that there was a clear lack of

transparency and does not provide confidence that the Authority obtained

CHAPTER 4


the best value for money that the market could offer. Those entrusted with

the funds of the Authority should always seek to obtain this objective.

Recommendations

4.66 It is recommended that: -

i. The Barbados Water Authority improves its governance structure by

ensuring the full involvement of the Board in all major decisions.

ii. The Authority follows its procurement rules and ensure that any

funds spent redound to its benefit.

iii. The matter of the payment for the “consultancy services provided”

needs to be explained. If no service was received, legal action should

be taken against all those involved in this matter.

iv. The Authority determines as soon as possible the way forward with

purchasing the Automatic Meter Reading (AMR) equipment and

encryption codes since the full benefits of acquiring the smart meters

will not be realized without them.

v. The Authority seeks to recover the monies paid to the Company for

the “AMR system” which was not provided.

vi. The Authority needs to decide what to do with the meter boxes stored

at the Belle Pumping Station.

CHAPTER 4


vii. The Authority also needs to determine what action, if any, should be

taken against those who ordered the boxes.

CHAPTER 4


RECONSTRUCTION OF RESERVOIR AT GRAND VIEW

Introduction

4.67 The Grand View Reservoir (the Reservoir), located at Government Hill,

St. Michael, was constructed in 1861. The Reservoir receives water from

the Belle Pumping Station and then releases this water into Bridgetown and

its environs. The Queen Elizabeth Hospital is one of the major entities

served from this reservoir.

4.68 When the reservoir fell into disrepair, the Authority sought to have it

reconstructed. A number of issues were observed with respect to this

project and these are discussed in the following paragraphs.

Issues relating to the First Firm

Engaging the Firm

4.69 The available evidence indicated that the Authority was aware of the need

to reconstruct the Grand View Reservoir prior to May 2015. Board minutes

indicated that the designs were completed in June 2015 and it was

estimated that the construction cost would be $6 million.

4.70 In October 2015, the Authority engaged the services of a Firm to

reconstruct the Grand View Reservoir without going to public tender. The

Authority indicated that this action was supported by Rule 239 of the

Financial Management and Audit (Financial) Rules, 2011 which permits the

acquisition of goods/services in cases of urgency.

CHAPTER 4


4.71 Notwithstanding that the Authority considered the repair of the Reservoir

to be urgent, nothing hindered the BWA from requesting additional firms to

submit proposals for the reconstruction of the reservoir within a reasonable

timeframe. In this regard, no evidence was provided to indicate that the

engagement of this Firm to perform this service was the best or only option

available.

PPP Arrangement with Firm not Clear

4.72 Board minutes and correspondence from the Ministry of Agriculture, Food,

Fisheries and Water Resources (the parent Ministry) stated that the BWA

entered into an agreement with the Firm to carry out this project, under a

Public Private Partnership (PPP)1 arrangement. The terms and rationale for

such an arrangement were not stated in the correspondence. The Firm

indicated that it was having difficulty in obtaining “a government backed

guarantee” and was unable to complete the project.

Assignment of Project

4.73 In September 2016, the Firm assigned its responsibilities with respect to the

financing and reconstruction of the Grand View Reservoir to another

construction Firm. The Firm was paid BDS $1.3 million prior to the

assignment. However, there was no information available in relation to the

value of the work completed. In addition, the Audit Office was unable to

determine the estimated value of the work still to be carried out. As a result,

1 A Public Private Partnership (PPP) is a long-term contract between the government and a private party for the delivery of public services

where the private party provides the financing for the project.

CHAPTER 4


it was not possible to determine the cost of the work which had to be

performed by the assigned Firm.

4.74 The second arrangement was distinctly different since it bore no relation to

the previous arrangement. The assignment should have resulted in the

second Firm completing the work started by the previous Firm which had a

project cost of $6 million. However, the assigned Firm submitted a new

proposal for the reconstruction of the Reservoir. The proposal for

BDS$23.93 million inclusive of interest of $7.74 million was accepted by the

Authority and a contract was awarded to the Firm.

Issues Relating to the Second Firm

No Board Approval seen for Proposal from Second Firm

4.75 Correspondence dated 28th November 2017 from the Quantity Surveyor

(hired by the BWA) indicated to the “assigned” Firm that the BWA had

accepted its financial proposal for the “Reconstruction of the Grand View

Reservoir”. However, the Auditors were not provided with evidence of the

Board’s approval of this proposal.

No Board Approval seen for Loan Agreement

4.76 On the 9th March, 2018, the previous Chairman of the BWA signed loan

documents to finance the work to be carried out on the Grand View

Reservoir. No evidence was seen of the Board approving this loan. This is

another example of the Board not fulfilling its fiduciary duty.

CHAPTER 4


4.77 The table below shows the summary of the Project costs according to the

Notification of Award of Contract.

Summary of Project Costs

Description of Cost Amount (BDS$)

Construction Cost 12,564,776.77

Design, Engineering and other soft cost 1,793,848.05

Construction Interest, ROI & Risk 1,829,720.49

Total Project Cost before Finance Interest 16,188,345.31

Interest- 8.35% / annum 10 years (fixed) 7,741,568.85

Total Project Costs including Interest 23,929,914.16

Deed of Charge

4.78 The previous Chairman of the BWA also signed a Deed of Charge of

Revenues (document between the 2 companies that creates a security

(charge) against the borrower’s assets). In this case, the asset would be the

revenue of the BWA as security for the due and faithful performance of BWA

of all its obligations under the Loan Agreement. This meant that if the BWA

defaulted on making a payment, the lender has a right to demand immediate

payment from any revenue collected. This could result in BWA’s finances

being placed in jeopardy.

Conclusion

4.79 A written contract adds certainty to any arrangement, establishes the rights

of the contracting parties and allows for monitoring of the progress of work

carried out. This arrangement was however absent in the agreement with

CHAPTER 4


the first firm. It is of concern that the BWA did not provide the estimated

value of the work to be performed when the Project was assigned. This

prevented the Audit Office from verifying whether the work carried out

equated to the funds paid and also in determining the value of the work

outstanding on the assignment.

4.80 The Authority has indicated that both arrangements were of a Public Private

Partnership nature. There is no evidence that other forms of procurement

were considered. The financing cost of this project is extremely high and

must be a source of concern for an entity that has been struggling

financially. Generally, the arrangement surrounding this project has been

unsatisfactory.

CHAPTER 4


ESTABLISHMENT OF DESALINATION PLANTS

& WATER WELLS

Introduction

4.81 The BWA invited Expressions of Interests from “financially and technically

competent entities” who wished to be placed on the short list to enter into

Public Private Partnership (PPP) contracts for the design, build, financing

and operation of desalination plants”. This was in an effort to provide

additional water to various parts of the country. This section of the report

examines issues pertaining to the establishment of these plants and the

contracting of a firm to dig a number of water wells.

Desalination Plant Mullins/Battaley’s & Trents

4.82 A review of the minutes of the Board meeting held on the 7th April 2016

revealed that the Board had agreed to place a temporary packaged

desalination plant in the Mullins/Battaley’s area in St. Peter. The Board also

agreed that the contract for the establishment of the temporary plant be

awarded to a Firm who was contracted to supply and install the desalination

facility. The plant was scheduled to be completed by September 2016.

Contract Signed Before Permission Granted To Use Land

4.83 The BWA signed the agreement on the 14th April 2016. At this time however,

the BWA had not obtained permission from the landowner. As a result, the

desalination plant had to be relocated.

CHAPTER 4


Relocation of Desalination Plant

4.84 A site near to the well and pumping station at Trents, St. James was chosen

as an alternative to the Battaley’s site for the desalination plant. To date,

permission has not been obtained from the landowner to run pipes across

the land to the site earmarked for the desalination plant at Trents, St.

James. This resulted in the desalination equipment being stored in

containers at the site, with no service being provided, at a cost of

BDS$152,750 per month.

4.85 At January 2018, BDS$2.22 millon was paid for rental of the desalination

equipment but the plant has not been set up. This has resulted in these

funds being spent without the delivery of water and constituted a waste of

funds by the BWA.

Drilling Of Wells At Trents, St James

4.86 On the 23rd September 2016, a proposal was made to the Barbados Water

Authority to drill and construct five (5) wells at Trents, St. James. The

proposal was accepted by the Authority and the contract to dig the five (5)

wells at Trents, St. James for an amount of $1.12 million was awarded to a

Firm via a letter dated 25th October 2016.

4.87 An amount of BDS$557,824.79 (fifty percent (50%) of the cost) was paid to

the Firm between the 14th November 2016 and the 6th December 2016.

However, a site visit by the Auditors to Trents, St. James on the 16th

November 2018 revealed that the Firm had dug and constructed only one

CHAPTER 4


(1) Exploration/Monitoring well. It has been over three (3) years since funds

were paid yet this project remains unfinished.

4.88 The BWA was to negotiate access to the land owned by the Ministry of

Housing to allow the Contractor to dig the wells. However, no evidence was

provided to indicate that access to the land was granted. The Authority

needs to obtain permission/agreement with the landowner in order to

expedite this project.

Desalination Plant at Hope, St. Lucy

4.89 After tenders were received and evaluated, the Board agreed that the

contract should be awarded to a company for a temporary desalination plant

at Hope, St. Lucy. The agreement between the BWA and the company was

dated the 4th April 2016. The firm was to ensure that the plant was

operational by the 1st July 2016. According to the agreement, the water

supply period was sixty (60) months from the commencement date of the

agreement and had a value of approximately BDS$10.96 million. The

Auditors visited this plant on the 15th November 2018 and found it was fully

operational.

Desalination Plant at Harrison’s Point, St. Lucy

4.90 The BWA invited a number of Firms to provide expressions of interest for

the construction of a Desalination Plant at Harrison’s Point, St. Lucy. The

project was subsequently awarded to two of the Firms in a joint venture on

the 12th December 2016. The Plant is to provide a reliable supply of

desalinated water (a minimum of 27,277 m3) per day at a cost of BDS$4.02

CHAPTER 4


per cubic meter. This contract has been entered into for a period of fifteen

(15) years and has a value of approximately BDS$40 million per year.

4.91 The BWA executed this agreement before obtaining the permission to use

the designated lands, and without knowing whether permission will be

granted to change the use of the land from tourism to commercial

development. It is best practice to ensure that a lease is in place for use

of a property before entering into any contract to build a structure on it.

Entering into the contract without the BTII granting the lease has now

resulted in a delay in this project. The BWA should not have committed the

land to this project without the relevant permission to use the land being in

place.

Water Wells at Groves, St. Philip

4.92 Without going to Public Tender, the Authority entered into two (2) contracts

with a firm who made an unsolicited proposal for the extraction of water at

Groves, St Philip. The Audit Office had requested information on the origins

of the submission and on how the contract prices were derived but, to date,

this has not been provided. These contracts were: -

To investigate, abstract and supply water to the Authority at a cost of

BDS $68,719,670.55 over fifteen (15) years at an estimated average

cost of BDS$4.58 million per year. This contract was signed on the 19th

November 2012.

CHAPTER 4


To design, finance, engineer, supply, install, erect, construct, and

commission pipelines, pumps and tanks for chlorination facilities in

order to facilitate the collection of water from the subject wells to

receiving tanks and deliver said water to the BWA’s receiving mains

at a cost of BDS $12,878,463.40 over an eighty-four (84) months

period. This contract was signed in 2015 (day and month missing from

contract).

4.93 Based on the Minutes of the Board meeting held on the 12th January 2012,

the Manager, Engineering noted that there was no indication as to how the

cost in the proposal had been arrived at. It would have been expected that

a thorough financial analysis of such large proposals would have been

provided to the Board prior to the award of these contracts. In the absence

of this analysis and a lack of competing bids, the reasonableness of this

project could not be determined.

Inadequate Capacity to receive Water being paid for

4.94 The first contract stipulated that the Authority would be purchasing 11,364

cubic meters daily or 4.15 million cubic meters per year. However, the BWA

did not have the mains capacity to take the amount of water contracted.

This resulted in the BWA paying for water for which it did not have the

capacity to process.

4.95 The Director of Engineering stated that the BWA needed to install 10 inch

and 12 inch mains to distribute the additional water contracted but not

currently being produced. He was of the view that this water would

CHAPTER 4


eventually be utilized by other areas. It has however been over seven (7)

years since the start of the contract and the capacity is still not in place.

Desalination Plant at Gibbons/Ealing Grove, Christ Church

4.96 The Authority, in an effort to improve the supply of potable water to the south

of the island, sought to establish a Desalination Plant in Gibbons/Ealing

Grove, Christ Church. To this end, the Authority invited Expressions of

Interest from parties with experience in the construction/operation of

Desalination Plants. The Board decided that the contract for the building of

the plant should be awarded to a joint venture. Furthermore, as decided by

the Board, the previous Chairman wrote the other companies thanking them

for their Expressions of Interest.

4.97 However, on the 5th October 2016, the previous Chairman signed a Water

Supply Agreement with another Company to construct a Desalination Plant

at Gibbons/Ealing Grove, Christ Church. The Agreement stipulates that the

desalination water delivery period “shall continue for fifteen (15) years” at

an estimated cost of BDS$40.42 million per year or BDS$606.32 million

over the fifteen (15) year period.

4.98 The Authority’s Procurement procedures required that all capital works be

put out to public tender and, after evaluation of the bids, a supplier is

awarded the contract for the good or service. There was however no

information provided as to why this Company was chosen or how the

contract price was arrived at.

CHAPTER 4


Audit Comment

4.99 Given the substantial amounts of money involved, it would have been

expected that the Authority would have adhered to its Procurement Policies

and Guidelines and selected a firm based on a competitive selection

process after a thorough examination of all bids. However, no supporting

evidence was provided to show that this process was complied with in the

selection of the Company granted the contract. The basis for selecting the

Company to provide the desalination plant was not made clear to the

Auditors.

SERVICE CONTRACTS

Introduction

4.100 In addition to the previous contracts, the Audit Office also reviewed

arrangements entered into with a number of service contractors not related

to the supply of water and the findings were as follows:

Maintenance Contracts

Contract for BDS$888,075.00

4.101 The BWA on two (2) occasions entered into contracts for the de-bushing,

landscaping and maintenance of its fifty-four (54) pumping stations and

reservoirs. The first contract came into effect on 4th January 2016 and

expired two (2) years after. The cost of the contract was a fixed sum of

BDS$880,075.00 payable in twenty-four (24) monthly installments.

CHAPTER 4


4.102 There was no evidence that this contract for services went out to tender. In

addition, no information was made available to the Auditors on how this

service was initiated or how the Authority determined that this cost was

reasonable. Without a competitive process available it would not be clear if

the price were reasonable.

Contract for BDS $2.21 million

4.103 The BWA further engaged the Service Contractor for a fixed sum of BDS

$2.21 million, for the de-bushing, landscaping and maintenance services at

its pumping stations and reservoirs. Under this contract, the BWA was

required to pay forty-eight (48) monthly installments of BDS$46,026.96. No

information was provided as to how the Authority determined that this cost

was reasonable. It should also be noted that the work was not awarded

based on any competitive selection process.

Contract for Plumbing Supplies

4.104 The Authority invited tenders to supply various pipes and pipe fittings. Ten

(10) tenders were evaluated on 22nd April 2016 by the Evaluation

Committee who determined that firms receiving eighty (80) percentage

points and above would be considered for the award of the contract. In this

regard, the Evaluation Committee selected three (3) firms to be considered

for the award of contract. The firm which was eventually chosen received

sixty-nine percentage points (69%), eleven (11) points less than the eighty

percentage points (80%) required to be considered for selection.

CHAPTER 4


4.105 It should however be noted that on receipt of a recommendation dated 13th

July 2016 from the then Minister of Agriculture “to engage the firm regarding

the Pipes and Fittings Tender”, the previous Chairman instructed the

General Manager to “give effect to the Minister’s directive”. Subsequently

the Procurement Manager, in a letter dated the 28th July 2016, wrote the

Firm that was eventually awarded the contract requesting that it “submit a

proposal for the financing of the tender, inclusive of any payment schedule

and any changes necessary to finance the pipes and fittings for one (1)

year”. This letter was copied to the Chairman of the Audit, Finance and

Tenders Committee. On the 30th September 2016, the Authority awarded

the said Firm the contract to supply various pipes and pipe fittings for

BDS$3.80 million plus interest of BDS$1.48 million to be paid over thirty-six

(36) months at BDS$146,890 per month.

Audit Comment

4.106 The Authority entered an agreement with the Firm for the supply of pipes

and pipe fittings, even though this Firm was deemed ineligible as it did not

conform to the required specification. Furthermore, the finance charge of

BDS$1.48 million was a very high interest payment on such a relatively

small purchase.

Supply of Community Tanks

4.107 The BWA entered into a contract with a Company for the supply of

community water tanks to a number of locations. This Company had made

an unsolicited proposal to supply community water tanks with varying

capacities of one thousand (1,000), two thousand (2,000) and three

CHAPTER 4


thousand (3,000) gallons, and install them at various critical points where

water outages mostly occur. These tanks were to be fully maintained by the

Company over five (5) years at a cost of BDS$67,000 monthly.

Audit Comment

4.108 The Authority should have gone to public tender for the supply of these

community tanks rather than accepting the first proposal submitted. The

tender process provides information on the price of what various suppliers

are willing to accept to provide a good or service. Without such a

competitive process the Authority would not be certain that it was receiving

the best value for its money.

GENERAL COMMENT

4.109 The Authority entered into a number of contracts for various services and

supplies during the period under review. However, these arrangements

were not in line with their tender policies, and lacked evidence as to how

the Authority determine that the contracted sums were reasonable. The

decision making in respect of these contracts was clearly not in the best

interest of the Authority.

4.110 It is my understanding that a number of these projects have been halted

due to a renegotiation process involving all the contracts of the BWA and

its suppliers.

CHAPTER 4


Recommendations

4.111 It is recommended that:

The Board of the Authority needs to take on its responsibility in

approving contracts.

BWA ensures that its’ legal, technical and financial personnel review

all contracts prior to their being agreed upon.

BWA ensures that the terms of its procurement guidelines are adhered

to; that there is value for money for the services and goods received;

and that any funds spent redound to its benefits and do not place its

finances in jeopardy.

BWA personnel are deployed to monitor the work performed by the

service contractors, to ensure that only work related to the project as

contracted is performed and that it is executed in a satisfactory

manner.

BWA ensures that it obtains all the necessary guarantees from

Government before committing itself to any agreement for which it

does not have the resources to fund.

Due diligence should be carried out to ensure that contractors who are

selected are financially and technically capable of performing the

contract.

CHAPTER 4


A signed contract should exist between BWA and the contractors

before any works are started.

A record of the terms of all contracts, all work to be carried out and the

cost of the work should be recorded and maintained.

Status reports on each project should be prepared and utilized to

monitor their progress and to ensure payments are made only for

works completed.

Persons who committed the BWA to financial obligations without

written contracts should be held to account.

The Authority also needs to be prudent in taking on any new debt and

seek to renegotiate contracts with onerous terms.

CHAPTER 4


Barbados Water Authority’s Response

While the findings of the Barbados Audit Office have highlighted

short-comings and weaknesses in the business process of the

Barbados Water Authority for the contracts and period under review,

they noticeably reflect the failings of proper corporate governance.

In all instances where the Auditor General has expressed concern,

there is a clear path as to the level of decisions made or directives

issued where management has had to comply in relation to contract

implementation that have all been executed beyond that of the Senior

Management Team – sometimes without due regard to the

procurement and tendering process. Having said that, some

decisions made in context were proffered on the basis of significant

urgency and limited funding.

We believe that this assessment is geared toward establishing and

maintaining an operating and governance framework that provides

reasonable assurance that:

The Authority’s assets are adequately and appropriately

safeguarded.

Current and future transactions are conducted in an

environment of transparency that reinforces responsibility and

accountability, and aligns with established policies.

CHAPTER 5


CHAPTER 5

Audit of Statutory Boards, Government Companies and Controlled

Entities ____________________________________________________________________________

he Office of the Auditor General is responsible for reporting to

Parliament on the audit of the accounts of all Government Agencies,

including Statutory Bodies, Funds and other controlled entities. It should

however be noted that the accounts of some of these entities are audited

by my Office; however, the majority are audited by private sector auditors.

5.2 This chapter outlines the status of the audits of Boards, other State

Agencies and Funds at 31st December 2019. It is divided into two sections.

The first contains reports on those entities audited by the Barbados Audit

Office, and the second reports on the entities that are audited by private

sector auditors.

Audits of Statutory Boards and other Agencies

Conducted by the Audit Office

Arts and Sports Promotion Fund

5.3 The Arts and Sports Promotion Fund was established under the Arts and

Sports Promotion Fund Act, 2003. The purpose of the Fund is to provide

financial assistance to activities and programmes conducted by arts and

sporting organizations for the development and practice of arts and sports.

T

T

CHAPTER 5


5.4 The Financial Statements for the years ended 31st March 2014 to 2017 have

been submitted to the Audit Office and will be audited during 2020. The

Financial Statements for the period 1st April 2017 to 31st March 2019 have

not been presented to the Office for auditing to date.

Barbados Boxing Board of Control

5.5 The Barbados Boxing Board of Control oversees the promotion and

regulation of boxing in Barbados. The Board receives an annual grant from

the Barbados Government, and is required to have its accounts audited by

the Barbados Audit Office. The Financial Statements for the 2016 to 2019

have not been presented to the Office for auditing to date.

Barbados Community College

5.6 The audit of the accounts of the Barbados Community College (BCC) is

conducted in accordance with Section 10 (1) of the Barbados Community

College Act, Cap. 36.

5.7 The audit of the accounts for the Financial years ended

31st March 2011 to 2013 were subcontracted to Private Sector auditors and

have been completed. The accounts were given a qualified opinion by the

auditors mainly as a result of the auditors not being provided with relevant

information in order to verify the value of the fixed assets. These were being

brought to account for the first time in 2011 when the College changed its

accounting system from a cash basis to an accrual basis.

5.8 The Financial Statements of the College for the financial years ended 31st

CHAPTER 5


March 2014 to 2019 were audited by members of staff of my Office during

2019. The audits of the accounts of the College are therefore up to date.

These accounts were qualified as the accounts receivables contained

amounts due from students who were accepted for entry by the College but

never attended. The receivable figures needed to be adjusted since it

contains amounts relating to these applicants which were not due to the

College. At the 31st March 2019 the receivables totaled $6 million.

Barbados Defence Force

5.9 The Financial Statements of the Barbados Defence Force for the financial

years ended 31st March 2015 and 2018 are currently being audited by my

staff. The audit of the accounts for the financial year ending 31st March

2019 is however outstanding.

Barbados Community College Hospitality Institute

5.10 The Barbados Hospitality Institute falls under the aegis of the Barbados

Community College. This Institute conducts training for persons pursuing

careers in the Hospitality Industry. The accounts for the financial years

ended 31st March 2011 and 2019 were audited during 2019.

5.11 There were some issues impacting on the fair presentation of the accounts.

These include the absence of supporting schedules in relation to accounts

receivables and other assets. As a result, a qualified opinion was given in

respect of the accounts presented.

CHAPTER 5


Barbados Liaison Service – Miami

5.12 The Barbados Liaison Service in Miami administers a program relating

to workers recruited in Barbados for attachment to hotels in the USA. An

audit of the accounts of the Service will be conducted during the next

on-the-spot visit to the Consulate in Miami.

Barbados Liaison Service – Toronto

5.13 The Barbados Liaison Service in Toronto administers a program relating to

farm and hotel workers recruited from Barbados. The audit of the Accounts

of the Liaison Service in Toronto will be conducted when Audit Officers next

visit the Missions in Canada.

Caribbean Centre for Development Administration (CARICAD)

5.14 The Caribbean Centre for Development Administration (CARICAD)

provides assistance to the countries of the Caribbean region for the purpose

of improving their administrative capability. The Financial Statements for the

Financial Years ended 31st March 2015 to 2018 are in the final stage of

being audited.

Catastrophe Fund

5.15 The Catastrophe Fund was established by the Government of Barbados in

2006 and is administered by the National Insurance Fund. This Fund

provides financial aid to persons with homes valued at no more than

$150,000 which are damaged by a catastrophe.

CHAPTER 5


5.16 The audit of the accounts of the Catastrophe Fund for the year ended

31st December 2009 to 2010 has been completed. The audit of the accounts

for the years ended 2011 to 2014 are in progress. However, accounts for

the financial years 2015 to 2018 have to date not been submitted to the

Office for auditing.

Central Liaison Service

5.17 The Central Liaison Service (Regional Security System) is a

regional security organization headquartered in Barbados and supported by

a number of Caribbean countries. Its functions include assisting with the

fight against illegal narcotics, and combating threats to national security in

member states. The audits of the Financial Statements of the Central

Liaison Service are currently being conducted by auditors in the private

sector.

Community Legal Services Commission

5.18 The Community Legal Services Commission provides legal aid to persons

in the country who need assistance, and meet the established criteria. As

indicated in my previous report, the audit of the accounts of the Commission

has fallen into arrears and this is mainly as a result of difficulties in

determining the payable outstanding. The Commission has many cases

outstanding and a value on these cases needs to be established. The

audits of the accounts for the financial years ended 31st March 2011 to 2019

are outstanding. The Commission needs to make a greater effort to make

its accounts available to be audited.

CHAPTER 5


Erdiston Teachers’ Training College

5.19 The Erdiston Teachers' Training College is an educational institution

established for the training of teachers. The accounts of the College for the

financial years ended 31st March 2013 to 2019 have not been submitted for

audit. The audits of the Financial Statements for this period are therefore

outstanding. The College needs to make a greater effort to make its

accounts available to the auditors so that they can be audited in a timely

manner.

National Assistance Board

5.20 The National Assistance Board (NAB) provides assistance to poor and

needy persons in the country in a variety of ways, and this includes

providing a Home Help Service. In accordance with Section 6 (2) of the

National Assistance Act, Cap. 48, the National Assistance Board is required

to submit its annual accounts, within three months of the end of each

financial year, to the Auditor General for audit.

5.21 The audit for the year ended 31st March 2019 has been completed. As a

result, the audit of the accounts are currently up to date. The Board has not

been abating (reducing) the pensions of those workers who came into the

service after September 1975, by amounts received as National Insurance

pensions as required by the Pension Legislation. This matter has been

brought to the attention of the Board and management of the NAB by my

Office for several years; however no action has been taken to resolve the

matter.

CHAPTER 5


National Insurance Fund

5.22 The audit of the accounts of the National Insurance Fund continues to be a

challenging exercise; however, some progress was made during 2018 with

the completion of audits for 2007-2009 which were assigned to private

sector auditors. The audit for the 2010 financial year was completed in 2019

while that for 2011 is in progress. However, the audits for the financial years

ended 31st December 2012 to 2018 are currently outstanding.

5.23 As highlighted in previous reports there are challenges in bringing the audit

of this Fund up to date. The first relates to the preparation and presentation

of the financial statements and schedules in order for the Auditor to perform

their tasks. In this regard, the absence of relevant information for the 2011

financial year has slowed audit work. I have assigned a number of officers

to work exclusively on the audit of the funds of the National Insurance

Department in 2020. In order to bring the audit of the Fund up to date, the

submission of accounts and supporting schedules must be done in a

timelier manner. If current trends continue, the Office would be hard pressed

to complete the audit of more than two or three years during 2020 and this

is unacceptable for a Fund of such significance to the Country.

Retraining Fund

5.24 The Retraining Fund was established in 2010 by the National Insurance and

Social Security (Amendment) (No. 2) Act, 2010-9, and is operated under

the management and control of the National Insurance Board. The Fund

provides funding for the retraining of persons who have become

unemployed. The training is administered by the National Employment

CHAPTER 5


Bureau. The accounts of the Fund for the financial years ended 31st

December 2015 to 2018 have not been presented for audit and are

therefore outstanding.

Samuel Jackman Prescod Institute of Technology

5.25 The Samuel Jackman Prescod Institute of Technology (Previously Samuel

Jackman Prescod Polytechnic) is an educational institution which offers

technical and vocational training in a number of disciplines. Section 6 (1)

of the Samuel Jackman Prescod Polytechnic Board of Management Order,

1983 (S.I. 1983 No. 78) requires the Board to submit to the Minister on or

before 1st October, in respect of the preceding financial year, Statements of

Accounts audited by the Auditor General.

5.26 The Institute has not submitted financial statements for audit on a consistent

basis for the past twenty years. Statements were submitted for the 2014 to

2016 financial years and these were audited. These statements were

however not signed by management and the Board and therefore no audit

opinion has been given. Statements for the financial years ending 31st

March 2017 to 2019 have not been submitted to the Office and hence an

audit of these accounts have not been conducted for these years.

Sanitation Service Authority

5.27 The Financial Statements of the Sanitation Service Authority for the

financial years ended 31st March 2014 to 2019 were audited during 2019.

The reports for the 2014 to 2018 financial years were qualified because of

the absence of expenditures that were not included in these financial

CHAPTER 5


statements. In respect of the 2019 statements the Authority changed its

basis of accounting from cash to accrual. There was however no

documentation in support of the opening balances for value of assets listed

in the financial statements, and this resulted in the accounts receiving a

qualified audit opinion.

Severance Payment Fund

5.28 The Severance Fund was established by the Severance Payment Act, Cap.

355A. The audit of the accounts of the Severance Fund for the financial

years ended 31st December 2010 to 2012 are currently in progress.

Accounts for the period 31st December 2013 to 2018 have not been made

available to the Audit Office for audit; hence these audits are currently in

arrears.

Sugar Factory Smoke Control Board

5.29 The Revenue and Expenditure Accounts of the Sugar Factory Smoke

Control Board for the years ended 31st December 2001 to 2019 have not

been submitted for audit in accordance with Section 3 (11) of the Registered

Sugar Factories Smoke Control Act, Cap. 355. The audit of the accounts

of the Board for these years is therefore outstanding.

Sugar Industry Research and Development Fund

5.30 The audit of the Receipts and Payments Accounts of the Sugar Industry

Research and Development Fund for the financial years ended 31st

December 2012 has been completed. The audit of the Accounts for the

CHAPTER 5


financial years ended December 2013 to 2018 is outstanding.

Sugar Workers’ Provident Fund

5.31 The Sugar Workers’ Provident Fund provides pensions and funeral grants

to persons previously employed in the Sugar Industry, and who were not

entitled to a contributory pension under the National Insurance and Social

Security Act. The financial statements for the financial years ended 31st

December 2010 to 2013 were audited by the Audit Office and reports issued

during 2019. The financial statement for the financial years ending

December 2014 to 2018 have not been submitted for audit and as a result

are currently outstanding.

Transport Authority

5.32 The Transport Authority was set up on 1st August 2008 to regulate, monitor

and plan for public transportation in Barbados. The financial statements for

the years ended 31st March 2010 to 2014 were submitted to my Office and

the audit is currently in progress. As a result of the non-submission of

financial statements by the Authority, the audits of the accounts for the

financial years ended 31st March 2015 to 2019 are outstanding.

Unemployment Fund

5.33 The Unemployment Fund, which is administered by the National Insurance

Department, pays benefits to those qualifying persons who were laid off

from work. The accounts for the financial years ended 31st December 2014

to 2018 have not been submitted for audit and as a result the audits for this

CHAPTER 5


period remain outstanding.

Audits of State Agencies Conducted by

Private Sector Auditors

5.34 Section 113 of the Constitution requires the Auditor General to be the

auditor of Ministries/Departments and Government controlled entities.

However, Private Sector Auditors conduct a number of these audits. A

report on the status of audits conducted by the Private Sector auditors is as

follows:

Statutory Boards and Government Companies

Barbados Agricultural Credit Trust Ltd.

5.35 The principal activity of the Barbados Agricultural Credit Trust Ltd. (BACTL)

is the management of the debt of the Barbados Sugar Industry Ltd. (BSIL)

and the Heavily Indebted Plantations (HIPs), a responsibility which was

assumed from the Barbados National Bank in the form of a portfolio transfer.

The audit of the accounts for the financial years ended 31st March 2014 to

2019 is outstanding. The Trust has indicated that it continues to experience

financial and other challenges which impact its ability to have the accounts

audited in a timely manner.

CHAPTER 5


Barbados Agricultural Development and Marketing Corporation

5.36 The Barbados Agricultural Development and Marketing Corporation

(BADMC) consists of two merged entities: the Barbados Marketing

Corporation (BMC) and Barbados Agricultural Development and

Management Corporation (BADMC). The principal activity of the BADMC

under Section 10 of the BADMC Act, 1965 - 21 is the management of the

production, marketing and processing of produce in Barbados. The BADMC

was established by the BADMC Act, 1965 - 21 to stimulate, facilitate and

undertake the development of agriculture, and to develop and manage, on

a commercial basis, Government plantations along the line of Government

policies.

5.37 The Corporation reported that the audit of the Financial Statements for the

year ended 31st December 2014 was completed. The auditor issued a

Disclaimer of Opinion as inventory of $1,226,824 was not verified. At the

time of writing, the audits for the financial years as at 31st March 2018 and

2019 were in progress. The Corporation reported that the audit for the

intervening years 2015 to 2016 will be performed subsequently. Therefore,

these audits are also outstanding.

Barbados Agricultural Management Co. Ltd

5.38 The Barbados Agricultural Management Co. Ltd is a subsidiary of the

Barbados Agricultural Trust Ltd, whose sole shareholder is the Government

of Barbados. The Company is involved in the cultivation of sugarcane and

non-sugar crops, and it manages and operates the sole sugar factory on

the Island. The Company has indicated that its accounts have been audited

CHAPTER 5


up to the period 30th June 2017. The audits for the financial years ended

31st March 2018 to 2019 are outstanding.

Barbados Cane Industry Corporation

5.39 The Barbados Cane Industry Corporation was established under the

Companies Act of Barbados to restructure the sugar cane industry. The

Corporation indicated that the audit of the Financial Statements for the

financial year ended 31st March 2014 was completed. The Corporation

previously indicated that scheduling problems with the auditors were

delaying the completion of audits for subsequent years. The audits of the

accounts for the years 2015 to 2019 were therefore outstanding.

Barbados Conference Services Ltd.

5.40 The Barbados Conference Services Ltd. (BCSL) is responsible for

the operations of the Lloyd Erskine Sandiford Centre, and provides

destination management and transport services under the brand names,

“Horizon Events’ Planners” and “Horizon Coaches and Tours” respectively.

The BCSL reported that the audit of the financial statements for the financial

year ended 31st March 2019 is completed.

Barbados Investment and Development Corporation

5.41 The Barbados Investment and Development Corporation (BIDC)

was established under the Barbados Investment and Development

Corporation Act, 1992 – 30 for the purpose of developing Barbados’

industrial, offshore financial, export and other related activities. The

CHAPTER 5


Corporation has indicated that the audit of its accounts has been completed

up to the financial year ended 31st March 2019.

Barbados National Oil Company Ltd.

5.42 The Barbados National Oil Company Ltd. (BNOCL), through its wholly

owned subsidiary, is involved in the exploration and production of crude oil,

natural gas and liquefied petroleum gas (LPG). The BNOCL is also engaged

in the processing of crude oil and the sale of petroleum products to the

Barbados market.

5.43 The audits of the accounts of the BNOCL for the financial year ended

31st March 2019 have been completed. The audit of the accounts are

therefore up to date.

Barbados National Terminal Company Limited

5.44 The Barbados National Terminal Company Limited is a Limited Liability

Company, and a wholly owned subsidiary of the Barbados National Oil

Company Limited. Its principal activity is the storage and distribution of

petroleum products on behalf of its parent company. The audits of the

accounts have been completed up to the financial years ended 31st March

2019.

Barbados Port Inc.

5.45 The principal activity of the Barbados Port Incorporated is to manage the

Port of Bridgetown, for the main purpose of enabling the Port to operate as

CHAPTER 5


a commercial entity. The Authority has indicated that the audits of the

accounts for the financial year ended 31st March 2018 and 2019 has been

completed. The audit of its accounts are therefore up to date.

Barbados Tourism Authority

5.46 The principal activities of the Barbados Tourism Authority (BTA) were to

promote, assist and facilitate the efficient development of tourism, and to

design and implement suitable marketing strategies for the effective

promotion of the tourism industry. This entity has been replaced by the

Barbados Tourism Marketing Inc. and the Barbados Tourism Product

Authority, which are reported on in succeeding paragraphs.

5.47 Audited Financial Statements for the financial year ended

31st March 2012 were submitted to the Audit office. The audit of Financial

Statements for the period 1st April 2013 to 30th September 2014, the point

of cessation of operations, was said to be ongoing.

Barbados Tourism Marketing Inc.

5.48 The Barbados Tourism Marketing Inc. (BTMI) reported that the audits of the

accounts for the financial years ended 31st March 2014 to 2019 are in

progress.

Barbados Tourism Product Authority

5.49 The Barbados Tourism Product Authority has merged with the Barbados

Tourism Marketing Inc. which has indicated that outstanding audits for the

CHAPTER 5


2015-2019 financial years are in progress.

Barbados Tourism Investment Inc.

5.50 The principal activities of the Barbados Tourism Investment Inc. are the

facilitation of tourism investment in Barbados, and the development of its

vested properties in private and public partnerships. A year ago the

Corporation had reported that the audits of the accounts for the financial

years ended 31st March 2014 to 2018 were being conducted. These audits

along with the one for 2019 are reported as in progress.

Barbados Vocational Training Board

5.51 The Barbados Vocational Training Board, previously called the National

Training Board, was established under the Occupational Training Act, 1979,

Cap. 42. Its purpose was to ensure an adequate supply of trained

manpower through occupational training for apprentices and trainees in the

country.

5.52 The Board has indicated that the audit of the accounts for the financial year

ending March 31, 2015 has been completed. The audits of accounts for the

period 2016 to 2019 are outstanding. Management needs to ensure that the

necessary action is taken so that its accounts for these years are audited.

Barbados Water Authority

5.53 The Barbados Water Authority (BWA) was established by the Barbados

Water Authority Act 1980 - 42 to take over the functions, rights and liabilities

CHAPTER 5


of the Waterworks Department on the “appointed day”, which is regarded

as 1st April 1981. The BWA reported that the audit of the accounts for the

financial years 2015, 2016 and 2017 were completed. Therefore, the audits

for the financial years 2018 to 2019 are currently outstanding.

Caribbean Broadcasting Corporation

5.54 The principal activity of the Caribbean Broadcasting Corporation

(Corporation) is the provision of broadcasting services through radio and

television. The Corporation reported that the audits of the accounts up to

the financial years ended 31st March 2019 have been completed. The

Corporation was issued a Disclaimer of Opinion as the Auditors were unable

to confirm or verify by alternative means accounts receivable of $2,856,369

as at 31st March 2019. The Corporation had also been issued with a

Disclaimer of Opinion for the 2018 financial statements as inventory of

$699,754 was not verified by the auditors, as they were appointed after 31st

March 2018 and thus did not observe the inventory count, and were unable

to verify it by other means.

Caves of Barbados Ltd.

5.55 Caves of Barbados Ltd. (CBL) is mandated under the Caves Act 2000-12

to manage and develop Harrison’s Cave and any other caves in Barbados.

The CBL indicated that the audit of the Financial Statements for the year

ended 31st March 2019 was completed. The auditors however did not offer

an opinion on the statements as adjustments to balances totaling $1.594

million could not be confirmed or verified as accurate.

CHAPTER 5


Central Bank of Barbados

5.56 The Central Bank of Barbados is incorporated under the Central Bank of

Barbados Act CAP 323C and is responsible for the administration of the

Financial Institutions Act, CAP 324A, and the International Financial

Services Act, CAP 325. Its main responsibility is to formulate, in association

with Government, monetary and fiscal policies to assist with the country’s

economic development programme. The audit of the Financial Statements

as at 31st December 2018 was completed and up to date.

Child Care Board

5.57 The principal activities of the Child Care Board are to provide and maintain

child care institutions for the safe keeping of children in need of care and

protection; and to make grants to voluntary organizations or bodies

operating child care institutions. The Board has reported that the audit of

its accounts for the financial year ended 31st March 2019 has been

completed.

Enterprise Growth Fund Limited

5.58 The principal activity of the Enterprise Growth Fund Limited (EGFL) is

the provision of loan financing and venture capital to dynamic, small and

medium sized Barbadian companies in the productive sectors. The EGFL

also provides business advisory services and technical assistance to its

client companies. The audit of the accounts for the financial year ended

31st March 2019 has been completed.

CHAPTER 5


Fair Trading Commission

5.59 The principal activity of the Fair Trading Commission (FTC) is to enforce the

Utilities Regulation Act, Cap. 282, the Telecommunications Act, Cap. 282B,

the Fair Trading Competition Act, Cap. 326C and the Consumer Protections

Act, Cap. 326D. The Commission is required to promote efficiency and

competitiveness, and improve standards of service and quality of goods

and services supplied by service providers and business enterprises over

which it has jurisdiction. The audit of the accounts for the financial year

ended 31st March 2019 has been completed.

Financial Services Commission

5.60 The Financial Services Commission (FSC) commenced operations on 1st

April 2011 under the Financial Services Commission Act, 2010. The

Commission represents an amalgamation of the offices of the former

Registrar of Co-operatives, the Securities Commission and the Supervisor

of Insurance and Pensions.

5.61 The functions of the Financial Services Commission (FSC) include the

supervision and regulation of the operations of financial institutions, the

establishment of standards for institutional strengthening for the control and

management of risk in the financial services sector, and for the protection

of customers of financial institutions, as well as creditors and the public.

They also include the promotion of stability, public awareness and public

confidence in the operations of financial institutions. The audit of the

accounts for the financial year ended 31st March 2019 has been completed.

CHAPTER 5


Grantley Adams International Airport Inc.

5.62 The Grantley Adams International Airport Inc. (GAIA) is responsible for the

commercial operations and management of the airport in accordance with

the Grantley Adams International Airport (Transfer of Management and

Vesting of Assets) Act (Act 2003-3). The GAIA has reported that the audit

of the Financial Statements for the financial year ended 31st March 2019

has been completed.

Hotels and Resorts Ltd.

5.63 Hotels and Resorts Ltd. was incorporated under the Laws of Barbados on

27th December 1995. The principal activity of Hotels and Resorts Ltd. is the

investment in, and development of hotel premises. The audit of the

Financial Statements for the period ended 31st March 2019 was completed

and an unqualified opinion was issued. The audit of the accounts were

therefore up to date.

Islandcrafts (Barbados) Inc.

5.64 The principal activity of Islandcrafts Inc. is the sale and marketing of

indigenous handcraft items. It was reported that Islandcrafts Inc. ceased

operations during 2015. The audit of the Financial Statements for 2014 has

been completed and presented to the Office. The audit of accounts for 2015

however remains outstanding.

CHAPTER 5


National Conservation Commission

5.65 The principal activity of the National Conservation Commission (the

Commission) is the management, maintenance and development of the

public parks, beaches and open areas of Barbados. The audit of the

accounts of the Commission has been completed up to the financial years

ended 31st March 2013. The Commission for the third year reported that the

audits of the accounts for subsequent years were in progress. In this regard,

the audit of the accounts for financial years ended 31st March 2014 to 2019

are outstanding.

National Council on Substance Abuse

5.66 The principal activity of the National Council on Substance Abuse (NCSA)

is to advise the Ministry of Home Affairs on measures for the eradication or

control of substance abuse. The accounts of the Council are audited by

auditors from the private sector; however, due to budgetary constraints the

Barbados Audit Office was requested to conduct the audits of the accounts,

for the financial year ended 31st March 2011 to 2019. The audit of the

accounts for this agency are therefore up to date.

National Cultural Foundation

5.67 The principal activities of the National Cultural Foundation (the Foundation)

are to stimulate and facilitate the development of culture, organize and

assist in cultural activities, and develop, maintain and manage theatres and

other cultural facilities and equipment provided by the Government of

Barbados. The Foundation has reported that the audit of the accounts for

CHAPTER 5


the financial year ended 31st March 2019 has been completed.

National Housing Corporation

5.68 The National Housing Corporation is a state agency which has responsibility

for the development of land and the construction of housing units for sale or

rent to low and middle-income persons. The Corporation has reported that

the audit of the accounts for the financial years ended 31st March 2012 is in

progress. The audits for the financial years ended 31st March 2015 to 2019

are currently outstanding.

5.69 The Corporation has reported that it has been experiencing staffing

challenges within the accounts department with the loss of senior staff,

some of whom were assigned to assist the Auditors. In addition, there is

the non-integration of most of the Corporation’s sub ledgers as well as the

absence of a functional financial reporting tool. The Corporation has

indicated that due to the backlog of audits spanning more than six years, it

has been experiencing difficulty in adequately researching some of the

outstanding audit issues. The Corporation has indicated that it is seeking to

fill vacant posts and will be submitting its accounts to the Auditors in their

current state.

National Productivity Council

5.70 The principal activities of the Barbados National Productivity Council

(BNPC) are to create and develop methodologies for measurement,

management and improvement in the public service and private sector, and

to provide technical advice and assistance for devising productivity- related

CHAPTER 5


payment schedules. This agency was abolished in 2019.

National Petroleum Corporation

5.71 The National Petroleum Corporation (the Corporation) has as its principal

activity the supply of natural gas to industrial, commercial and domestic

customers. The Corporation has indicated that the audits of the accounts

for the financial years ended 31st March 2016 to 2018 which were

outstanding have been completed. The audit of the accounts for the

financial years ended 31st March 2019 is however outstanding.

National Sports Council

5.72 The principal activities of the National Sports Council (NSC) are to maintain

and develop sporting facilities provided for public use, and

to stimulate the development of sports in Barbados. The Council

reported that the audits of the accounts for the financial years ended

31st March 2013 to 2019 are in progress.

Needham’s Point Holdings Limited

5.73 Needham’s Point Development Inc. was incorporated under the Companies

Act of Barbados on 13th January 1999, its sole shareholder being the

Government of Barbados. The principal activities of the company are the

ownership and operations of the Hilton Hotel. The audit of the accounts for

the financial year ended 31st March 2019 has been completed.

CHAPTER 5


Needham’s Point Development Inc.

5.74 Needham’s Point Development Inc. was incorporated under the Companies

Act of Barbados on 22nd August 1996, its sole shareholder being the

Government of Barbados. The principal activity of the company is to

oversee the development of the lands at Needham’s Point. The audit of the

accounts for the financial year ended 31st March 2019 has been completed.

Queen Elizabeth Hospital

5.75 The Queen Elizabeth Hospital (the Hospital) has as its principal activities

the provision of medical care for patients, facilitating the provision of medical

education and research, and providing facilities and technical support for

education and training in nursing and other health related professions.

5.76 The Hospital has reported that the audit of the accounts for the financial

year ended 31st March 2011 has been completed. The audits of the

accounts for the financial years ended 31st March 2012 to 2019 are

outstanding. The Hospital has indicated that, over the years, audits have

been plagued with the slow appointment of auditors, and the lengthy

turnabout times to supply the relevant information as requested. The

Hospital has indicated that a reorganization of the human resources

(finance) function has commenced in an effort to improve turnabout times.

The Hospital has also indicated that Auditors have been appointed unto

2021.

CHAPTER 5


Rural Development Commission

5.77 The Rural Development Commission (the Commission) was incorporated

on 21st August 1995 under the Rural Development Commission

Act, 1995 - 12. Its principal activity is to improve the quality of life of persons

living in rural communities in Barbados. The Commission reported that the

audit of the accounts for the financial year ended 31st March 2009 is being

finalized. In this regard, it should therefore be noted that the audits of


outstanding.

Student Revolving Loan Fund

5.78 The Student Revolving Loan Fund (the “SRLF”) was established under the

Student Revolving Loan Fund Act, 1976-20. The principal activity of the

Fund is the provision of loans to eligible Barbadians pursuing full-time

studies in post-secondary, technical, vocational, undergraduate and

graduate programmes. The Fund has indicated that the audit of the

accounts of the Fund for the financial year ended 31st March 2019 has been

completed and was therefore up to date.

Technical and Vocational Education and Training (TVET) Council

5.79 The principal activities of the Technical and Vocational Education

and Training (TVET) Council are to provide advice on policy, and to prepare

plans and establish standards for technical and vocational education at the

tertiary level, in accordance with national policies and economic needs. The

audit of the accounts for the financial year ended 31st March 2019 was

CHAPTER 5


reportedly in progress.

Transport Board

5.80 The Transport Board’s principal activity is the provision of transportation to

the general public. The Board has indicated that audits of accounts for the

2016 to 2019 financial years have been undertaken. The audit of the

accounts for the 2012 to 2015 financial years are said to be in progress.

This is an unusual situation as financial statements and audits are prepared

in a sequential manner with earlier years being audited first.

Urban Development Commission

5.81 The principal activities of the Urban Development Commission (UDC) are

to undertake slum clearance and improve social amenities in urban areas.

The UDC also provides loans for assistance in house acquisition, repairs

and improvements. The Commission reported that the audit of the accounts

for the financial years ended 31st March 2008 to 2019 had not been

conducted.

Audits of Secondary Schools

5.82 Section 20 (1) (b) of the Education Act requires that the audited accounts

of secondary schools be submitted to the Minister not later than six months

after the close of the financial year which ends on 31st March. The status

of the accounts of these schools at 31st March 2019 was as follows:

CHAPTER 5


Up-to-Date Audits

5.83 The audits of the accounts of the schools listed below have been completed

for the financial year ended 31st March 2019. The accounts of these schools

are therefore up-to-date as required by the Education Act.

Deighton Griffith Secondary School

Daryll Jordan Secondary School

Audits not Up-to-Date

5.84 The audits of the accounts of the following schools were not up-to-date as

required by the Education Act.

Alexandra School

5.85 The School has reported that it is awaiting the audited reports on its

accounts for the financial years ended 31st March 2013 to 2015. The School

reported that the audits for the periods ending 31st March 2016 to 2019 had

not yet commenced.

Alleyne School

5.86 The School reported that the audits of its accounts for the financial years

ended 31st March 2016 to 2019 had not commenced and are therefore

outstanding.

CHAPTER 5


Alma Parris Secondary School

5.87 The Alma Parris School was closed in August 2017. The audits of accounts

for the period 1st April 2016 to the closure of the School are however

outstanding.

Christ Church Foundation School

5.88 The Christ Church Foundation School reported that the audits of the

accounts for the financial years ended 31st March 2013 to 2019 were

outstanding.

Coleridge and Parry School

5.89 The School has reported that the audit of the accounts for the financial year

ended 31st March 2012 is completed. The audit of the accounts for the

financial year ended 31st March 2013 is said to be in progress. The audit of

the accounts for the financial years 2013 to 2019 are also outstanding.

Combermere School

5.90 The audits of the accounts of the Combermere School for the financial years

ended 31st March 2011 to 2019 are outstanding.

Ellerslie Secondary School

5.91 The school has reported that the audits of its accounts for the financial years

ended 31st March 2017 to 2019 were outstanding.

CHAPTER 5


Frederick Smith Secondary School

5.92 The Frederick Smith Secondary School has revealed that the audits of the


outstanding.

Grantley Adams Memorial School

5.93 The audits of the accounts of the Grantley Adams Memorial Secondary

School for the financial years ended 31st March 2013 to 2019 are

outstanding.

Graydon Sealy Secondary School

5.94 The Graydon Sealy Secondary School reported that the audit of the

accounts for the financial year ended 31st March 2016 was in progress.

However, the auditors have experienced some challenges that have

retarded the progress. The audits for the financial years ended 31st March

2017 to 2019 are also outstanding.

Harrison College

5.95 Harrison College has indicated that the audits of the accounts for the

financial year ended 31st March 2018 to 2019 are outstanding. The audit for

2018 was said to be in progress.

CHAPTER 5


Lester Vaughan School

5.96 The Lester Vaughan School reported that the accounts for the financial

years ended 31st March 2013 to 2015 were being audited. The audits of the

accounts for the period ended 31St March 2016 to 2019 had not yet

commenced.

The Lodge School

5.97 The Lodge School has once again reported that the accounts for the

financial years ended 31st March 2017 to 2018 are being prepared for the

auditors. These along with the audit for 2019 remain outstanding.

Parkinson Memorial School

5.98 The audits of the accounts of the Parkinson Memorial School for the

financial years ended 31st March 2013 to 2019 are outstanding. The

School indicated that the private auditor was experiencing problems with

the audit, and the Ministry of Education has been informed on the matter.

Princess Margaret Secondary School

5.99 The audits of the accounts of the Princess Margaret Secondary School for

the years ended 31st March 2013 to 2019 are currently outstanding.

Queen’s College

5.100 The audits of the accounts of Queen’s College for the financial years ended

CHAPTER 5


31st March 2013 to 2019 are outstanding. The School has indicated that the

auditors have stated that the reports from the accounting system did not

produce the necessary information to conduct the audits.

Springer Memorial Secondary School

5.101 The audit of the accounts of the Springer Memorial Secondary School for

the financial years ended 31st March 2013 to 2019 is outstanding.

St. George Secondary School

5.102 The audits of the accounts of the St. George Secondary School for the


St. Leonard’s Boys’ Secondary School

5.103 The audits of the accounts of the St. Leonard’s Boys’ Secondary School

for the financial years ended 31st March 2013 to 2019 are outstanding.

St. Michael School

5.104 The St. Michael School reported that the audits of its accounts for the


General Observations

5.105 The level of arrears in the audits of state entities continues to be a cause of

concern. The Ministry of Finance had indicated that it wanted the accounts

CHAPTER 5


of statutory entities brought up to date by mid-2019 which was always going

to be a challenge.

5.106 The Public Finance Management & Audit Act calls for improvement in the

financial and operational reporting of state enterprises. This will be a great

challenge for some of these agencies. Improvement in financial reporting is

predicated on a full assessment of the underlying issues creating the

problems, and necessary action being taken to rectify the identified

deficiencies. In this regard, the recruitment and training of staff, and the

improvement in the accounting and information systems of these

enterprises are critical.

5.107 The agencies reported on in this chapter have responsibilities for providing

services to the public and are responsible for the spending of hundreds of

millions of public funds annually. The auditing of their accounts on an

annual basis is an important aspect of good governance and accountability.

This process is required by law. Action therefore needs to be taken in

relation to those charged with the management of Government funds, to

ensure that the audits of accounts are completed as required by law.

Documents

Barbados Audit ffice · 1.5 The Audit Office is therefore involved in three types of audits. One type (Compliance Audit) involves verifying whether the financial rules and other laws